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Hard Money Financing Is Filling the Commercial Development Void

No one needs to tell you that financing a construction project is a tough sell at traditional lending institutions today. In part, banks and mortgage companies have little say in the decision because of the federal regulations imposed since the 2008 crisis.

The fact that you had to wait as much as 6-months to get a loan for your industrial construction project could be less of a bother when you must meet a project deadline or lose everything. This is a prime example of when getting a hard money mortgage could be your solution.

When Cash Flow Is the Problem

The most common reason that construction companies need to borrow money has nothing to do with lack of assets and everything to do with cash flow. A mortgage is only one way to get your income to outgo ratios in balance.

Other options include:

  • Factoring instead of Collections
  • Fix and Sell loans
  • Bridge Loans

Invoice factoring has been a long tradition in the U.S., beginning after the revolutionary war in the 1776. Although it has been labeled as a negative means of infusing capitol into your business, many multinational corporations and large enterprises endorse this as a viable method.

Instead of taking out a loan that uses your tangible assets, you can exchange your account receivables invoices for immediate cash.

Fix and sell loans are typically used by home improvement companies that are on a deadline to finish a remodeling project in order to get paid by the homeowner. Most contractors work on a tight budget and unexpected renovating costs can tip the cash flow scale in the wrong direction.

Bridge loans provide you with the money to get your construction project started until your traditional loan is approved.

Non-Homestead Residential Alternative Financing

When New York developer Greg Martin searched for his first loan to purchase a vacant apartment building, his previously friendly banker explained that the rules had changed and they would not be able to underwrite such a risky venture.

Although Greg’s credit worthiness remained in good standing and his proven track record of repayment had never been an issue, the bank’s models of lending had changed.

Greg faced a dilemma – should he rethink his entire business plan, expand into some affiliated area or find a private lender for his project. He discovered, as many people do, that changing horses in the middle of the stream does not ensure that his bank will consider his new venture less risky than his current one.

He opted for alternative real estate investment property financing and received the money fast enough to close the deal before his competitor grabbed it.

Snafus in real estate transactions can almost be assured in today’s market and when dealing with traditional lenders, these paperwork clogs can create havoc on your ability to run your business efficiently.

By filling the void between the time you need the money to keep people working and the time that the bank gets the kinks worked out for your approval, hard money financing appears to be a friend for many.

Do you need a Hard Money Loan for your next real estate purchase or refinance fast?