Commercial hard money lenders are easy to find.
Finding the the best one for your situation, is not.
Why is that you ask?
Because while most traditional bank lenders are very similar to each other, commercial hard money lenders have their own niches.
Some will only work with seasoned commercial property investors, deals that provide a royalty or specific types of properties, like hotels or multifamily.
I would imagine you already did a quick Google search, found hundreds of commercial hard money lenders and may have even called a few.
While these directories provide a great starting point, separating the good from the bad can be another story.
Ok, so what’s the answer?
How do successful borrowers know which hard money lenders are the best fit?
You are about to find out, but first lets answer some of the most frequently asked questions about commercial hard money:
What exactly is a hard money loan?
Hard Money loans are asset-based loans that are secured by real property or other hard assets.
The collateral is based on the current price that a lender would receive in the case of borrower default.
What is a commercial hard money lender?
Hard money lenders can be a private investor or a company that pools funds together to lend to commercial borrowers.
The main differences between traditional lenders and hard money are:
1. Closing speed
2. Interest rates + points charged
3. Term length
What are the interest rates on commercial hard money loans?
Interest rates on hard money loans usually range between 10% to 21%.
Depending upon your situation, your lender will also typically add anywhere from 2 to 10 points to the cost of the loan.
Are hard money loans only for borrowers with bad credit?
Many years ago, hard money loans were considered as a last resort type of financing.
Times have changed. Now commercial hard money loans are often the preferred form of financing for:
1. New construction
2. Property rehab
3. Cash-out refinancing
4. Commercial bridge loans
What information does a hard money lender need?
These lenders are savvy, experienced and ready to make loans. But, most importantly, they do not like to waste time.
If you seem unsure, don’t have a legitimate deal or don’t know what matters to them, they will quickly move on to the next opportunity.
So, when you first approach them, here are the only 5 things they will want to know:
1. What is your property worth today, meaning, your current NOI or Net Operating Income
2. What is your current financing situation and what is the story behind this property
3. Your projections for the best case scenario – the ProForma
4. What are you planning to do with the money
5. Your exit strategy and how you plan to move onto permanent financing
How do I find a commercial hard money lender that I can trust?
It is essential that you work with a reputable lender, one who has a proven track record and a vast amount of experience.
Successful investors, developers and property owners do it one of two ways:
1. Get referrals from trusted business associates
2. Establish a relationship with an experienced loan finder like WHISTA.
Doing so will enable you to eliminate the guesswork, save weeks of your valuable time and be dialed-in to lenders that are focused on your exact loan needs.
Now you know what to expect, what the general costs are and what your commercial hard money lender will need from you.
Any tips I may have left out? Feel free to add them to the comments section below.