Hard Money Loan Refiancing

When you need immediate cash whether you have decent credit or bad credit a hard money loan refiancing may be your best option. A bad credit loan  is not based upon your credit scores but is based upon the equity in your investment asset. Your asset is used as collateral for immediate funding. These types of loans are generally short-term loans of 1 – 5 years in duration and in most cases the amortized payments are interest only. Owner’s equity in the property generally should not exceed 60%. This means the amount owed on the property should not exceed 60% of the appraised value of the property.

 Hard money loan refinancing is generally not provided by a bank but rather private investors or private commercial lenders who have the available cash. Thus, the interest rate applied to the loan is not related to the federal bank rates but rather they depend upon the current market conditions, availability of  money, default rates and the minimum return on investment the investor would like to receive. Because this type of loan is a higher risk factor the borrower should expect higher interest rate and points.

Keep in mind that these loans are for borrowers who need a temporary solution to solve their current problem. For small business owners or investors a hard money loan may be appropriate where funds are needed to stablize the business during a cash crunch, where bank financing is no longer available because of bad credit, to save the commercial property from foreclosure and to purchase bargain price commercial property.

In submitting a loan request  the borrower want to show the lender that they are responsible business owners with long and short term plans and a complete understanding of their business, fiscal situation and business needs. You want to describe your problem, discuss what the business was like before the problem arose, why you are requesting the loan, if there have been attempts to obtain financing elsewhere and what were the results. One of the most important factors is to be honest and provide as much information as possible.

In submitting your request for refiancing, you of course specify the amount of money needed and how the money will be used. You must provide the business operating income, expenses, assets and liabilities and a personal financial statement, as well as, any financial information that may be relevant or that may be considered as material in assisting the investor in making a decision.

With respect to property that is being provided as collateral you must describe the property inlcuding square footage, number of units, property enhancements, an appraisal or estimated value based upon comparables with photos of the property. If there are inventory or other assets involved list them.

As the borrower you must provide some historical data concerning the property or business, for example, when the property was purchased, purchase price, how it was initially funded, how much you as the owner have invested in the property and the amount of equity. If it is a business with employees, how many, the management team and the board of directors, if applicable.

You will also have to address your repayment plan for the loan, taking into cosideration whether the property can produce sufficient income, if not, can you personally make the monthly payments. What loan term is being requested? Again, the loan is temporary so an exit strategy will be required taking into consideration as to whether the property will be sold or refinance again at a later date. If you follow these suggestions provided the equity is available in the property, the loan process will proceed smoothly and efficiently.