HARD MONEY BUSINESS LOAN
Many small business owners have equity in their primary residence, investment real estate or business owned property that they would like to use to help support their businesses. Now with a Hard Money Business Purpose Loan they can use a hard money loan to qualify, even with poor credit or unverifiable cash flow. This can open many doors when small business owners are rejected from banks and conventional mortgage lenders.
Consumer Loans versus Business Purpose Loans
Due to usury laws and the Dodd-Frank law, there are very strict government regulations that limit the costs and mandate certain qualifying factors such as, debt to income ratio’s, for any consumer using the primary residence as the collateral for a mortgage. These usury laws are necessary. They provide good protection for consumer mortgages (consumers financing their owner occupied homes). These protections are very much needed for consumers financing or refinancing their homes. Not only are these laws not good for business owners; these usury laws do not apply to small business owners. When a business owner chooses to use the equity in their primary residential homes to borrow funds and use them for their business they can. But the distinction between a business owner getting a consumer loan versus a business purpose loan is very precise and the penalties to lenders very high. For this reason most Hard Money Lenders and Private Money Lenders will not use a primary residence as collateral for a loan.
When to Use a Hard Money Business Loan
Hard Money Loans and Private Money Loans are expensive and to be used when you have exhausted conventional options for financing. This means you have been turned down by your bank and /or conventional mortgage lender. They also have not qualified for traditional business lending. The reality is that though Hard Money Loans are expensive, they can be less expensive than many other options and effectively save business owners money.
These loans are less expensive than merchant cash advances and most revenue based financing. Hard Money Loans can even be cheaper than credit card financing. Merchant cash advances, revenue based financing, some term business loans and credit card financing are short term in nature. These financing types are not designed to run your business. These financing programs are meant to help you meet an urgent need or take advantage of a lucrative business opportunity. Hard Money Business Loans can help not only meet short term needs but also consolidate higher cost short term financing options to reduce costs and improve cash flow.
Qualifications for a Hard Money Business Loan
Whether a small business owner has been denied a loan for poor credit or unacceptable cash flow, they may still qualify for a Hard Money Business Purpose Loan. There are options for no minimum credit score and options requiring a minimum score of 640 or higher. For owner occupied residential property the key is the majority of the proceeds must be used for business purposes. Therefore, we use 51% of all funds requested as the minimum threshold. This means no more than 49% of the loan proceeds can be used to pay off an existing mortgage. For example; if the loan amount is $100,000 then the most to be used to pay off existing mortgage is $49,000. $51,000 must be used for business purposes. The minimum loan is $100,000 and the maximum loan is $5,000,000. The maximum loan to value is 65%. There must always be an acceptable exit strategy as these loans are short term. The term is usually 12 months. Acceptable property for Hard Money Business Purpose Loans are: owner occupied residential 1- 4 unit properties, 1 – 4 unit residential investment property, residential and commercial investment property, business occupied or investment commercial property.
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