Commercial hard money loans are an excellent option for business owners who need to secure financing quickly and efficiently. This blog post will explain commercial hard money loans, the advantages of using them, and the disadvantages. We will also give you five reasons why hard money loans are the best choice for your business. Finally, we will provide tips on finding the best commercial hard money loan Virginia.
Commercial Hard Money Loans Explained
Commercial hard money loans are short-term real estate loans that offer a higher loan-to-value (LTV) than traditional mortgages. They are used to finance the purchase or renovation of commercial properties. They can be used for various purposes, including bridge financing, fix-and-flip loans, and cash-out refinances.
Commercial hard money lenders charge higher interest rates and fees than traditional mortgage lenders because the loans are riskier. The LTVs on these loans can be high, making them last for borrowers who can’t get financing from a bank.
If you’re thinking about applying for a commercial hard money loan, it’s essential to shop around and compare different lenders before you make a decision. Make sure to find a lender willing to work with borrowers with low credit scores and other types of unique financial histories.
Commercial hard money loans are popular among real estate investors because they can get quick access to the funds they need, even if a bank would turn down their loan application due to poor credit or lack of down payment.
They can also be used for short-term financing to generate cash flow while longer-term commercial mortgages are secured, pulled together, or restructured.
Borrowers should only use commercial hard money when appropriate. If they live near the property in question or have significant equity in it, it’s unlikely that commercial hard money will be the best choice. Commercial hard money is more appropriate for people looking to flip houses, buy low-priced properties out of foreclosure, or finance short-term projects.
Advantages of Commercial Hard Money Loans
Speed of funding: Commercial hard money loans can be funded quickly, often within 24 to 48 hours after the loan is approved. This is a big advantage over traditional bank loans, which can take weeks or even months to fund.
No red tape: Unlike with traditional bank loans, there is much less red tape and paperwork involved in obtaining a commercial hard money loan. This means that the process is much faster and simpler, which can be a big advantage for business owners who need quick access to capital.
Quick turnaround: Besides being fast to fund, commercial hard money loans can also be given back quickly if the borrower needs them. This means that borrowers do not have to wait months or years before getting a new loan because a previous one has been paid off. If a borrower does need a different type of financing in the future, this will make it much easier to obtain the funding they need without going through another lengthy application process with multiple lenders.
Easier qualification: Commercial hard money loans are often easier for borrowers with thin credit files and high debt-to-income ratios to qualify for than traditional bank loans.
Disadvantages of Commercial Hard Money Loans
Higher interest rates: One of the most significant disadvantages of commercial hard money loans is higher interest rates than traditional bank loans. The rates are often in the range of 10 to 20 percent, which is 4 to 9 times higher than what borrowers might be able to get for a home equity loan or a regular business loan from their local bank.
High fees: Commercial hard money lenders also charge very high origination fees and other upfront costs, such as application and processing fees, closing costs, and inspection fees. This means that borrowers can end up paying 2% or more of the total loan amount in upfront costs, even though their monthly payments will only be 1% to 3% of the outstanding balance each month.
Higher LTVs: Because commercial hard money loans tend to have much shorter terms than traditional bank loans, LTVs tend to be higher for commercial hard money loans. This is because the lender will want a short-term return on investment and some margin for error if the borrower defaults early on, which would happen more quickly with a more significant loan amount.
Funding can be difficult: Some borrowers may find it difficult to get financing from a commercial hard money lender until they have been in business for at least two years and have built up good corporate credit. This means that they might not qualify until their business has been open for several months, which can make it very hard to buy houses out of foreclosure or flip homes before this period passes.
Reasons Why Hard Money Loans is the Best Choice
Flexibility of usage: The best reason business owners should opt for commercial hard money lending over other types of financing is because there are so many different ways these funds can be used. Some common uses include real estate investment, buying new properties, renovating, building buildings or homes on land owned by the borrower, purchasing equipment for expanding the business’s operations and starting new projects.
Protection against interest rate fluctuations: Commercial hard money loans are the best choice because they offer built-in protection against interest rate fluctuations that other types of financing might not provide. Because operators can quickly close out their loan after just months or a few years, they won’t have to keep making payments on something that becomes too difficult for them to afford if rates rise faster than expected. This will also prevent borrowers from taking on more debt than they could handle if rates go up sharply in the next five or ten years.
Flexibility of payments: Commercial hard money loans are excellent because borrowers will usually only have to make payments every month if they still owe more than the house is worth at that particular time due to depreciation. This means that borrowers can take their time repaying the loan and won’t be stuck with several years of payments into something that doesn’t belong to them anymore should it become difficult for them to keep up with monthly payments.
Non-recourse financing: Last but not least, borrowers who take out commercial hard money loans will only ever be responsible for repaying the principal and interest on their loan if they can’t pay it back. This means that the lender won’t have any claim over other assets owned by the borrower or their family members to get paid back.
Finding the Best Commercial Hard Money Loans in Virginia
There are several factors to consider when looking for commercial hard money loans Virginia. One of the most important is the reputation of the lender. You want to work with a lender with a history of making loans that get repaid on time and in full.
It would be best if you also asked about the interest rates and fees charged by the lender. Be sure to compare rates between different lenders to find the best deal possible. And don’t forget to ask about terms and conditions, as well as turnaround times.
By asking these questions upfront, you can ensure that you find the best commercial hard money loan for your needs. You can trust BridgeWell Capital for all your commercial hard money loans in Virginia. Their team of experts is committed to ensuring that you get the right loan at a competitive rate to help grow your business and satisfy any financial need.