A Comprehensive Guide to Bridge and Hard Money Loans for Entrepreneurs in West Palm Beach

For entrepreneurs, financing is a crucial aspect of success when launching a business. You must have the proper funding to get your business off the ground. Because there are several types of financing to choose from, you may have a difficult time deciding whether a traditional bank loan or an alternative avenue of funding is best for you. Although they can be more expensive than bank loans, hard money loans are a great financing option for many businesses. Here is everything you need to know to determine if bridge and hard money loans are the right financial solution for your company.

What Are Hard Money Loans?

A hard money loan is a form of financing that is secured by putting an asset up for collateral. These loans are most often used to finance real estate investment, and they are typically secured for short-term financing until the business begins to turn a profit and can fund its own investments. Although hard money loans are sometimes considered a last resort, they often play a crucial role in flipping real estate properties.

What Are the Terms for Hard Money Loans?

While the interest rates for hard money loans are often high, there is usually plenty of room to turn a healthy profit because this type of financing is short-term. The terms for a hard money loan vary among lenders, but you can expect similar terms to the ones listed below.

  • Low interest rates
  • Documentation, appraisal, application, inspection and document processing fees.
  • High LTV rates depending on the project
  • Generous terms

How Is Hard Money Different From Private Money?

Hard money and private loans are similar because they both provide financing by individual lenders rather than a bank, but they have several distinct differences. Private loans may be given for either short or long-term durations, but they are typically extended by people you have a personal relationship with such as friends or family members. This means the money can be used for any reason, but it is often difficult to build enough trust with someone for them to agree to loan you a substantial amount of money.

In contrast, hard money loans are extended by financial companies or individual investors who secure hard assets as collateral. The loans are primarily short-term and rarely last beyond eight years, so if you are searching for long-term financing, you will need to transition to a different type of loan as you near the completion of your hard money loan. This type of financing is most beneficial for helping fix or flip real estate properties.

How Do Hard Money Loans Differ From Traditional Financing Options?

Traditional lenders focus heavily on the borrower, while hard money lenders are typically more concerned with the assets. To receive a hard money loan, you will need to put up collateral, which is why this form of financing is so popular for real estate transactions. The piece of property in question serves as the collateral while you are free to use the money you receive to fix and flip the property before reselling for a profit.

This means that hard money loans are easier to qualify for because you simply need something valuable to use as collateral rather than perfect credit. Banks often limit the amount of financing they will extend to borrowers with multiple properties, while hard money loans have no restrictions. They are most often used for real estate purchases but they can be secured for other purposes such as equipment financing. 

Can Hard Money Finance Real Estate?

Hard money loans don’t require a perfect credit history or a W-2 income, which is why they are popular for real estate investors. However, they are not designed for long-term financing. If you are ready to invest in a rental property that does not need any remodels or renovations and you qualify for a bank loan, you are probably better off securing a lot with lower interest fees from a traditional lender. If you are trying to improve your credit score and do not qualify for a traditional loan yet, you may want to apply for a hard money loan with the intention of securing traditional financing once the loan period is over.

If you’re business works by purchasing and flipping unconventional properties and selling them for a profit, hard money loans are an ideal source of financing. These properties are not intended to stay in your possession for long and are usually sold before the loan period runs out. To ensure you can turn a decent profit, it is best to secure hard money loans that use the 70 percent rule.

What Is the Approval Process for Hard Money Loans?

Your chances of securing a hard money loan are higher if you start building relationships with lenders before you need the money. While these lenders do take credit score into consideration to determine approval, they do not base their entire decision on this one aspect. They are more concerned with seeing if you are trying to resolve any credit issues, which is why developing a working relationship with the lender prior to applying for a hard money loan is a good idea.

Hard money loans require less documentation than other types of financing. You will still be required to show your tax return information for the past two years and your credit score, but because so little paperwork is required, you can expect to close on a hard money loan within two weeks of being approved.

How Do Hard Money Lenders Determine Eligibility

Hard money loans are easier to qualify for than other types of financing, but they still have strict requirements to determine eligibility. Along with analyzing your credit score to determine if you are trying to resolve any issues, lenders also look at your budget and the scope of your project. If you are using the loan to flip a real estate property, the lender will consider the type of property you are working with, because certain properties move quickly and provide them with a better return on their investments.

After analyzing all of these elements, a hard money loan will determine whether or not you are approved for a loan. It is important to remember that you do not need a great credit score to qualify, but you do need to prove that you are managing any issues responsibly.

What Is the Exit Process for Hard Money Loans?

Hard money loans are processed similarly to other types of financing. Once the loan is approved and the contracts are signed, the lender will disperse the money in increments over the loan period. The borrower may be required to produce invoices and pictures of the project to prove that it is staying on budget. The borrower may request a disbursement as the project nears completion. If you think that there is any chance you may want to hold on to a property for longer than the term of a standard hard money loan, you are better off applying for a traditional bank loan because hard money lenders often will not extend the loan beyond eight years.

What Are the Advantages of Hard Money Loans?

The primary disadvantage of hard money loans is that they cost more than other types of financing. Although you may end up spending a lot on interest rates, hard money loans are advantageous for the following reasons.

  1. They can take over when traditional types of financing fall through when a property is under contract.
  2. They are quick and can often be closed within 10 business days.
  3. You can often qualify for a hard money loan even if you are not eligible for other types of financing.
  4. The approval process is less stringent than with traditional bank loans.
  5. They work with properties that many banks are not willing to finance.

What Should You Look for in a Hard Money Lender?

As in every industry, there are a few hard money lenders that want to see you fail so they can make more money on your loan. However, these lenders are by far in the minority. You can make sure you don’t end up working for one of the unscrupulous lenders by vetting them just as you would anyone else you choose to work with.

Striking up a professional working relationship with potential lenders will help you gauge their intentions. You can find candidates through the Real Estate Investor’s Association, and you can ask for referrals from your colleagues. The best way to determine if a hard money lender is reputable, however, is to look at past investments. Lenders with good track records on investments should be safe to work with.

A hard money loan is a great financial option for many businesses. While it may be structured differently than traditional bank loans, a hard money loan is often easier to qualify for. If you think this avenue of financing is right for your business, HML Solutions is happy to extend a hard money loan to help your company thrive in the competitive marketplace. Contact us today to apply.

Florida Property Investors: Covering Immediate Costs While Waiting for Funding

The perfect property investment is lined up and you are ready to make renovations so you can start generating revenue. The only snag is that the funding you initially requested is going to take a month or longer to disburse. This is an all too familiar situation for many property investors throughout Florida. Fortunately, there is a way to keep property acquisitions and renovations on track without getting caught up in the bureaucratic red tape of traditional lending institutions.

Florida Property Investors Need Faster Financing

Traditional lenders finance commercial real estate transactions in Florida. Yet over the past decade or so, banks and other institutions have been changing how they approach investment properties. Ever since the Great Recession – when traditional lenders handed out loans that caused the commercial real estate bubble to burst – banks have been tightening their requirements for borrowers. Higher credit and collateral requirements, combined with lower loan amounts, have made it more difficult for property investors in Florida to get the adequate financing for their commercial real estate projects. Add to this long processing times and the need to cover immediate expenses, such as closing costs, permits, and hiring contractors, and Florida property investors can feel marginalized at times.

Finding a Better Solution

When Florida property investors need ample funding without jumping through hoops to get traditional loans, they use bridge and hard money financing. Bridge and hard money loans are not dependent on credit histories or collateral. Instead, they are structured around the overall value of the property involved in the project. The faster processing times and higher lending ceilings allow property investors in Florida to get the financing they need for acquisitions, renovations, and even new construction. Bridge and hard money loans also allow local investors to cover time-sensitive costs to keep projects on schedule, so they can get to the finish line faster and start generating revenue from their properties.

Finding the Best Bridge and Hard Money Loans in Florida

Florida’s property market is unlike any other in the United States. Even between counties and cities, property markets are impacted by different micropressures which can greatly affect the financing needed for projects and transactions. Additionally, because every project is unique, there is no such thing as a “one size fits all” solution. Florida property investors need bridge and hard money loans from a lender who is intimately familiar with local real estate markets. That’s where HML Solutions comes in. At HML Solutions, we specialize in bridge and hard money loans specifically designed for Florida’s property markets. From Escambia County in the panhandle over to Nassau, on down to Miami-Dade, and everywhere in between, our team works directly with local property investors to tailor solutions so they can reach their goals quickly and efficiently. Since we handle all applications and processing in-house, we can make funds available much faster than traditional lending channels.

If you need financing to cover immediate expenses for your next property transaction or project, contact the people who know Florida better than any other lender. Contact the experts at HML Solutions.

Financing Partner Buy-Outs in West Palm Beach

2021 is turning out to be year of mergers, acquisitions, and partner buy-outs in West Palm Beach. From niche businesses to freight companies and the commercial development sector, partner buy-outs are trending as the solution to grow businesses and forge ahead as the local economy prepares for the post-pandemic era.

Understanding Partner Buy-outs

There is a number of factors driving partner buy-outs in West Palm Beach. In some partnerships, one party may simply be burned out after trying to make it through the pandemic. Their motivation may be diminished, or they may want to explore opportunities in a different market. In other cases, partners may have very divergent visions, and leveraging a buy-out may be an amicable way to settle differences and hand over control.

Financing for Partner Buy-Outs

No matter what the reason, partner buy-outs can be simultaneously delicate and time-sensitive affairs. Assets need to be evaluated, management structures need to be reorganized, and new budgets and timelines need to be drawn up to make a buy-out a success. Above all else, there needs to be adequate capital available to execute a partner buy-out, maintain operations, and ensure a smooth transition. That’s a pretty tall order for any commercial operation in West Palm Beach, often requiring additional financing to carry out plans. Unfortunately, there are obstacles in securing funds for a partner buy-out in West Palm Beach. Traditional lending channels take a long time to process loan requests, and approvals are far from guaranteed. To keep buy-outs on track, entrepreneurs in West Palm Beach use bridge and hard money loans. Hard money loan solutions can be arranged quickly, because they are structured around the property and assets involved in the buy-out. This allows the transition and restructuring to stay on track without disrupting day-to-day operations.

At HML Solutions, we specialize in bridge and hard money loans for projects, transactions, and partner buy-outs in the West Palm Beach area. All loan applications are handled in-house so we can provide fast approvals and quick access to funds. To learn more about our bridge and hard money loans for buy-outs in West Palm Beach, contact the team at HML Solutions today.