How Hard Money Loans Can Grow Your Commercial Real Estate Investment
If you are in investor trying to grow your commercial real estate investment, you might want to consider a hard money loan. As you first begin investing, you may not have the assets necessary to meet the strict approval criteria of conventional lenders. However, you may own a prime piece of property that can work toward your advantage.
Hard money loans comes from a direct lender using your piece of property as the collateral. These lenders are not limited by tough federal regulations that oversee bank loans, making it more advantageous for you to rely on unconventional collateral. The lender is more interested in the potential income that lies with your commercial property than your personal or commercial credit score. Relying on the property opens financing doors that may otherwise be closed for your line of work.
Hard money loans can be used by real estate investors to develop their property, but they can also be used as a bridge loan to grow your business. By inserting hard cash into your operations, you may hire additional help, develop new properties or finance a new marketing campaign. As you develop your business, you will bring cash flow back into your company, making it more attractive to conventional lenders. If you are eventually able to get a bank loan, you can use it as a tool to work with the hard money loan to expand your commercial real estate. Acquiring new properties translates into additional collateral the next time you look for financing.
Collateral is a vital part of the financing, even though your initial experiences with traditional lending may have been unsuccessful. Traditional loans require collateral in addition to strong credit and substantial business history, and no matter how much property you may own, your attempts to borrow might be unsuccessful. However, hard money loans rely first on collateral to secure the funds, but over time it works like credit. As your property investments expands and the value increases, you are able to leverage the new threshold for additional financing needs.
Real estate investments can work as both short and long-term solutions for financing. Relying on the property value for collateral can open up short-term lending possibilities that might otherwise be out of reach without the right credit or business history. As a long-term investment, your property value will increase and can be employed as credit in the event new financing or short-term cash flow bursts are needed.