There are some very good reasons to seek out hard money loans. You may have an investment opportunity but not the credit rating to get a traditional bank loan. You may have the same opportunity but do not have the time to wait for a traditional loan to come through. Whatever the reason, going to private money lenders may be your best bet. There are some things you should know if this is the route you want to take.
- Make sure you have a direct line to the person making the lending decision. This is often easier said than done but when you are considering taking out a loan from private lenders, this can make a big difference in the outcome for you. If it is at all possible, you need to speak to the top dog at the company you are trying to work with. This will give you a much better chance of getting the “yes” that you want.
- Have all of your ducks in a row before you go into talk to the lender. When you are dealing with private money lenders, you have to understand what they are looking for. The reason they agree to lend their money with collateral is that they can see where the investment will work for them. If you want to get a yes from them, you need to show them a number of things. Having a great plan, that is well thought out and very detailed, will help you get the money you need to make your investment. Any time you spend working on your pitch better and perfecting your plan of attack for your proposal, will be time very well spent.
- Get them the paperwork they need quickly. No one likes to wait. When you are trying to borrow money from a private lender, you need to make sure you get them the paperwork and whatever supporting documentation they are asking for when they ask for it. This is not the time to dilly dally. When you are able to get them the paperwork and documentation, you are doing a few things. You are showing them that you are a responsible person and that lending to you is not a bad idea. You are also making their lives and jobs easier, which is always a good thing.
- Work with private lenders on their terms. There are a lot of things about borrowing money from a private lender that are different from getting money from a more traditional financial institution such as a bank. There are often higher fees and you have a lot less time to pay back your loan. On the flip side of that, there is a lot more flexibility for private lenders than there are for the others. This means that you can work something out with the private lender in terms of how long your repayment can take and what the fees and interest will be.
- Never use your home as your collateral. There are a lot of reasons for this. In the first place, a lot of private money lenders do not want to get into that kind of deal with someone. People can make a lot of bad decisions when their home is on the line. If you are in a position where you have found yourself a really good investment opportunity but do not have another property to use as you collateral but your home, you may want to see what you can do to get the money you need from someone you know, and not go to a private money lender.
Again, there are a lot of very good reasons to seek out a loan from private money lenders. This is especially true when the window of opportunity for you to get in on a new investment or project is small. The turnover for getting your hands on the money from private money loans is a matter of days, not the months that you may need with more traditional loans from banks. Because of the nature of these kinds of loans, you need to do a little more homework and to be more prepared when making your case to the lender.