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.

For more information call 888-407-6767 or email louisj@fbcfunding.com

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Fix and Flip with no monthly payments

Fix and Flip with No Monthly Payments

No Monthly Payments? New Fix and Flip purchase rehab program with no monthly payments!!! Loan payments can be rolled into the loan for 12 months plus up to 90% of the purchase price with 100% of the rehab costs.  Most Hard Money Lenders look at the collateral (the property), the borrowers experience, the borrowers credit (credit score and credit profile) and the borrowers assets to determine qualifications. Some Hard Money lenders are even reviewing income and tax returns. This program uses computer analysis software that focuses on the collateral, the borrowers experience and the borrowers credit. Based on the analysis we are able to offer No Monthly Payments during the term of the loan with as little as 10% down of the purchase price. We can also advance the first draw at closing.

Fix and Flip with No Payments – Benefits

These are the benefits of this purchase rehab program.

Term: 12 months depending on how extensive the renovations needed.

No Payments: For loan to value up to 70% of the after rehab value payments can be rolled into the loan so no payments are made during the term of the loan.

Rates: Rates are from 10% to 12%. Rates are based on a combination of LTV, LTC, Borrowers experience and borrowers credit score. A borrower with extensive experience (especially recent) purchasing a property a loan to after renovation value and requires a low loan amount as compared to the total cost of the project will get the lowest rate. Rates can be as high as 12% for the riskiest projects. But even at 12% those projects would have a hard time finding the benefits of this program from another lender.

First Time Investors Accepted: Experience is a key metric in the loan qualification but we will approve first time investors as well.

No Income Verification: No income questions. No income taxes. No income verification.

No Asset Verification: No Asset questions. No bank statements. No asset verification.

Quick Close: Most loans can close in three weeks, depending on title and appraisal. The valuation is usually complete in 1 week. As long a there are no title issues the average loan is cleared to close in 14 days or less.

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Hard Money. There are many types of hard money or fix and flip financing programs available today. The question many investors are asking is, what is the best option for me. This answer really depends on your circumstances because there is no one best option for every investor. That is  one major advantage of working with a hard money mortgage broker who will properly represent your interest and not just sell the program they have.  Most Real Estate Investors want to put no money down for the purchase and get 100% financing of the rehab as well. They also want the lowest interest rate and lowest points and fees. Unfortunately, you can not have both the best terms and no investment. So here are important factors to consider when determining the best  hard money loan purchase rehab program for your situation. Consider these points:

• How much money do you have for the down payment
• How much money do you have for renovation
• How much experience do you have as a fix and flip real estate investor
• Are you working on other projects now
• What is the return on this investment
• Are their additional potential projects you can do before this one is complete
• Do you meet lender guidelines

No Money Down Financing

On the surface this should be the best option always because you are not investing any money for the purchase or rehab of the property. In reality the Hard Money Lender is taking all of the risk while you earn the majority of the profit. For the increased risk the rates and fees are higher. Therefore if you have options the added costs of 100% financing may not be to your benefit. You must weigh the options. Obviously, if you do not have the funds for down payment and renovation or you are working on other projects now, the 100% financing may be your only option. You must realize the Hard Money Lender will either take an equity position or charge higher points and fees. Typical hard money terms are  about 20% to 30% down payment (or more), 10% to 12% interest rate and 3 to 4 points. You may get a lower down payment with similar terms if you have very good credit and substantial experience as a fix and flip real estate investor. In contrast for no money down option you would pay 16% to 18% interest and 8 to 10 points, plus you have a shorter term to complete the project generally 3 to 6 months. These higher rates and fees generally equate to a cheaper equity partner. Most equity partners who put up all the money get at least 50% of the profit.

How to Qualify for 100% Financing Hard Money Loan

Most Hard Money Lenders that offer the 100% financing option look at two major qualification requirements. The first is the property. What is the purchase price, the as is value, the cost of rehab and the after rehab value. If they can realize an after rehab value of no more than 60% to 70% of their total investment of the purchase price and rehab costs (some lenders even cover closing costs if the ARV LTV is good) and their profit is sufficient then the most important criteria is met. Secondly, the HML considers the experience of the investor. How many projects have they completed in the last year or two. Many require three to four recent projects before they would consider a fix and flip investor experienced.

Finally choose the no money down hard money loan if you have no choice or if you are working on other projects and just do not want to deploy your funds. There are investors who only use OPM (other peoples money) and their philosophy is to do as many deals as possible without using their own money. You can make an informed choice.

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There are no money down financing options available. I am a mortgage broker who specializes in real estate financing for investors. I even offer Hard Money. I get calls nearly everyday from people who want to put no money down to purchase and rehab properties. They have been taught or they just believe it is a good idea to invest with no money and let the lender take all the risk. Yep, if you invest no money you have nothing to lose. The lender takes all the risk. Really that is what it is all about. Invest no money and get a great profit for doing so by purchasing, renovating and selling distressed properties.

WHY NOT

The lender takes all the risks.

You make all of the profit.

This sounds very good.

Unfortunately, it is not really the best option for some people. In reality no option is the best option for everyone.

Some would say if you have cash to buy and rehab the property then sell it with no financing at all that is the best option.

Really it is not. For instance, if you had $100,000 and it took all $100,000 to complete a fix and flip then sell it for $150,000 making a gross profit of $50,000 with no financing costs you did a great thing. You did.

But, a better solution is to use $30,000 for down payment and do 3 deals. If the financing costs was $10,000 per deal you would still net $40,000 per deal for a total of $120,000 profit. Which would you prefer – $50,000 profit or $120,000 profit

The same is true for 100% financing. Assume you had a lender give you 100% of the money needed say the same $100,000 and assume 18% interest and 10 points and standard closing fees (real numbers) you would pay over $20,000 and net only $30,000. Is that a good deal. Maybe, Maybe not. It depends on your options. Simply put if you have money for down payment you would make $40,000 per deal versus $30,000 per deal.

So really, all three options have their advantages and their disadvantages.

Option One: invest all cash for purchase rehab and yield the greatest profit per deal.

Option Two: invest 30% (more or less) yield less per transaction but have money to do more deals yielding a greater total profit because with the same amount of money in Option One you can do 3 similar size deals.

Option Three: invest no money  yield the least dollar amount return but the greatest rate of return. Because rate and fees are highest with no investment then your net profit is the lowest.  Because you invested nothing your return on investment is highest.

Which is the best option for you? Lets assume in a one year time period in option one your return is 150%, option two it is 133% ($90,000 invested for $120,000 profit) and unlimited return in option three because you invested nothing.

If option one or option two are not options you have due to lack of funds and you are forced to choose option three yet it is the greatest return on your investment even though it is the least return.

No Money Down

This is the least return but the greatest per cent return. So if you have no option and you just hate the thought of paying such high fees. Do one deal. Make some money to put down on the next deal so you would make more money. Or just relish in the fact the lender is taking all the risks by investing in you since your are not investing any money. Make less money but the greatest return on investment, because you have no financial investment. Some people only do deals like this and they make lots of money using other peoples money. Finally, consider the Hard Money Lender your cash partner. If you had a partner who put up all the money what per cent would you share with them.

The choice is yours. The object is to fix and flip some properties and make great money and an awesome living.

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