Financing with hard money loans is a great option for investors and businessmen. It is a fastest way to access capital for completing business transactions. This is in contrast with conventional bank loans. Traditional bank will give loans to borrowers after large verification process. Hard money loan is risky asset-based loan for a business. Hard money loans are mostly applied when company needs loan in emergency and unfortunately no other means of loan can be adopted. Only that time is suitable for hard money loan.
Hard money lenders are individuals or companies that have funds available for investment. To be a hard money lender, they have to be flexible and able to move quickly to take advantage of lending opportunities in the marketplace. When business is in such conditions in which your business cannot adopt any traditional loans then hard money loan is the way mostly adopted for small business. Hard money loans for small businesses are mostly taking in emergency conditions. There are many lenders which are ready to finance hard money loans, these lenders mostly are San Francisco hard money lenders and California hard money lenders.
How to Get Hard Money Loans
Hard money loans not based on trust or reference to the borrower, it is based on the collateral which the borrower offers to the lender. The amount of loan depends upon the collateral given by the borrower to the lender. Credit score of the borrower doesn’t matter but the amount of collateral does matter a lot. If the amount of loan increases the ratio of property then borrower should arrange more collateral by adding his personal assets in property.
Loan to value Ratio
Entire value of collateral is not used, a loan to value ratio is calculated and according to it further dealing is continued. The loan to value ratio is basically the percentage of properties value. Loan to value ratio of hard money is calculated by dividing loan value / appraised value of property. As much the as the ration increase it decreases the chance of getting loan. Mostly lenders measure their risk by this ration. San Francisco hard money lenders also measure the risk by this approach.
Interest rate on hard money is mostly higher than other traditional approaches because the risk involve in hard money loans are more than other traditional means. California hard money lenders mostly charge 12% to 29% interest on their hard money where as the small business has to pay 4% to 8% interest. The other terms on a hard money loan are also less favorable than on traditional loans.