Small business financing can be a complex topic. Even when you ignore all the options that do not suit your business or available assets, there are a lot of options to choose from. One of the most popular types of loans is the hard money loan, but many borrowers get confused about what they are because there seem to be so many different products labeled hard money loans.
Hard Money Defined
The short version is that the term means the same thing as the term private loan, but that oversimplifies the issue. If you feel like there are many different types of loans with the hard money label, that is because there are. You have short and long-term options, collateral-backed loans, and many other products available. What makes them all hard money loan subtypes is the kind of backing they have.
Traditional banks and financial institutions work with the Federal Reserve system, which allows them to borrow at extremely low rates and then lend the money out to businesses like yours. As a result, they only need to actually hold a small portion of the loan’s value in cash reserves of their own. Hard money loans from private investors and financing firms, on the other hand, have the financial resources to back their loans. That is what makes them hard money, as opposed to the alternative soft money loans.
Secured Loans From Private Lenders
If you have asset collateral and apply for a secured loan, you can reduce the emphasis on your credit report and the interest you pay at once. Typically, secured loans also provide you with a higher maximum loan balance because the lender’s risk is reduced by the value of the asset. As a result, asset bridge loans and credit lines are very accessible when you deal with hard money lenders. Those are not the only options, either.
Some lenders also offer hard money versions of the commercial mortgage, making it easier to refinance when you need a large sum of capital. You could even use those loans to buy a new property if you have the right down payment in your company’s cash reserves.
Unsecured Hard Money Loans
If you do not have asset collateral and you are not looking for a large loan, there are unsecured loan options for working capital. The costs are high, but approval processes are fast and loan terms are very short. This allows you to access the capital you need when short-notice opportunities arise, provided you have the income to manage repayment. Keep that in mind when your cash flow is tight and a customer wants to place a big order and keep your other loan options in mind for when you do have those assets to refinance.
Abundant Wealth Financial provides hard money loans that feature fast closings and generous terms. Contact our offices today to get the financing you need.