Hard Money Lender
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Welcome to the world of the hard money lender where big money, big profits and ruthless adherence to the rules of the game are king. This is a place where hope dwells supreme that someone will get into a financial corner and can't get out without Superman's aid. This is a place where "It's not personal, it's just business" is uttered often and sincerely. It is a world where a reputation for bailing out people has been earned over time and where even banks and credit unions will refer the hard cash provider to business people and investors looking for quick money to make a deal fly. It's a sphere where this private lender might be so revered in the area in which he lives that a yearly convertible ride in the annual town parade is a correct assumption.
In most cases, the hard money lender steps into local situations and plays Superman. Take the case of the local grocer who has been there forever, but is slowly being drained dry by the new discount store out at the edge of town. Our hero knows the grocer personally and still shops there himself and so when the grocer comes to him for an infusion of cash to remodel the store into more of a modern market feel, the lender is ready to open his wallet. However...there are some big time requirements due to the circumstances; and by the way, there are always circumstances with a private cash investor. The grocer goes to the hero because his business credit is not good and he knows the bank will tell him, "It's not personal, it's just business" and show him to the door. The hero knows that and inwardly smiles. He is definitely in the driver's seat.
A hard money lender will rarely ever finance more than seventy percent of the needed cash for any project. The thirty percent yet needed must be provided by the one making the loan request in order to provide some security for the high risk transaction. The private loan provider will lend the grocer seventy percent of the four hundred thousand dollar request for eighteen months at twenty three percent and four points, all based on the grocer putting his building up for collateral. But that's not all. The grocer must agree to put up at least half of the remaining money needed through a lien on his personal home. These private lenders attempt to make each deal as secure as possible for themselves, and since the money is coming from a private source, the restrictions banks have on them from governmental edicts are not applicable to these lending agreements. Don't misunderstand; these private cash providers are, for the most part honest, but they are ruthless in what they demand.
Any place where a financial deal can be secured by high value property is of interest to the hard money lender. For instance, if a prime piece of land suddenly becomes available and a developer wants to snatch it up before it is sold elsewhere, an investor like our Superman is the man to call for two reasons. First, one of the reasons local businessmen become these types of lenders is because they have intimate knowledge of the area in which they live, including businesses and real estate. In this case, if a private lender knows the land that has just come up for sale and sees the value in it, the likelihood of getting his help has just risen dramatically. Secondly, the developer wants this guy's help because instead of waiting thirty to sixty days for the cash, the hard money lender can have the money in a couple of days and the land will still be there for purchase.
A hard money lender can help a construction company owner who wants to buy a rundown strip mall and completely restore it to thoroughly modern standards. The lender knows exactly where this mall is located and sees the possibilities and potentials in that plan. But sometimes a different investment opportunity comes along and the cash provider will see merit in it also. If an entrepreneur has sights set on starting a trucking company with ten new eighteen wheeler rigs, a Superman might find this deal intriguing, particularly if he knows the requester's background and family life and believes in his abilities. Without having those nagging requirements banks have for lending, the private provider of cash can go on gut instinct if so desired. In this case the new rigs would be the collateral but in every case the music is the same. From the grocer to the entrepreneur, the hard money lender will demand high interest, limited loan life, a large amount of points, a seventy percent ceiling on the total desired lending amount and if at all possible, the borrower must provide private equity as part of the agreement.
A hard money lender can be found in many towns and most cities across the country. They will be both men and women who probably have high profile executive jobs and who definitely do not put out advertising proclaiming their cash investing services. In small towns the lenders probably will be known as wealthy and people will know of their lending practices. But they will be people to whom banks will refer customers when the bank cannot help. In most cases, they will be respected and trusted, but in a former president's words, "trust but verify" is a totally appropriate adage. Jesus reminds us that a person's life will not be judged on wealth but on our soul's relationship with Him. "For what shall it profit a man if he shall gain the whole world but lose his own soul?" (Mark 8:36)
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