Getting Approved for a Hard Money Loan in Florida

Hard money lending is a type of asset-based financing. This means that the lender bases the loan approval on the value of the property being financed. You don’t have to worry too much about your credit rating, stable employment status or ability to repay the loan. The important factor is the value of the property.

Because of the short terms of the loans, these loans are sometimes called bridge loans or swing loans. Some factors that set these loans apart from conventional real estate financing are:

  • Fast approval process
  • Designed for the short term
  • Higher interest rates
  • Higher down payment required
  • Borrower’s credit not important
  • More flexible terms
  • Receive funds quickly

Loan Approval Process

The steps that you need to take to get approved for a hard money loan in Florida are a little different than for a conventional loan. Getting hard money financing for a real estate project may be scary to someone who has never done it before, but it is a straightforward and fairly quick process.

Here are six steps that you need to take to get hard money financing:

1. Line Up Your Down Payment

Since a hard money loan does not depend on your credit rating but on the value of the property, the loan-to-value (LTV) ratio that lenders will be willing to finance is usually 70% or less. This is because, if you default on the loan, the lender will take over your property. They want to make sure that the property is worth at least the amount of the loan, in case they need to sell the property to cover the defaulted loan.

If the lender finances 70% of the purchase price, for example, then you will have to come up with a down payment of 30%. There are several ways to find this large down payment amount:

  • Save up the cash to cover the down payment. This will certainly be the easiest way to make your loan application attractive to lenders.
  • Use another property you own for collateral. The lender will place a lien on this property to cover the down payment.
  • Borrow the down payment elsewhere. Perhaps you can borrow from family or friends, or you may be able to get a second loan on the property to cover the down payment.
  • Find a private investor who is willing to put up cash for the down payment in exchange for a stake in the profits from your investment.

2. Find a Hard Money Lender

Hard money lenders are not regulated as much as banks are. Make sure that the lender you find has a good reputation. It is a good idea to search for a hard money lender before you need one so that you will be prepared to close quickly once you find a suitable property.

Here are some signs of a good lender for your projects:

  • Other investors recommend them. Join a real estate investment group so that you can ask other investors who they would recommend for hard money lending.
  • Their website looks professional and not like a fly-by-night operation.
  • They have not been involved in any lawsuits or shady deals.
  • They will meet you in person and will send someone to view and appraise the property.
  • They are able to show you some successful past projects.
  • They have handled the type of project you are interested in before. Some lenders specialize in certain types of projects, such as hotels or restaurants. Make sure they have experience in your investment category.

Once you have found some good candidates, you may want to meet with them and ask them some questions about their lending process even before you have a property in mind.

3. Show Your Professionalism

You will want to impress the lender with your professional attitude toward your business. When you are ready to apply for a loan, gather information about the property you want to purchase. Research the property in the real estate listing service in your area or on Zillow or Trulia. Include your business plans, blueprints, construction budgets and other pertinent information. Collect data on the neighborhood and its growth potential.

4. Submit Your Application

When you have found a property, you should be ready to submit your application. Consult with your lender ahead of time so that you have time to gather the documents you need. Unlike conventional loans that can take months to get approved, approval for these loans will only take a couple of weeks. Make sure your contractors and other staff will be ready to go once the loan is approved.

Even though your personal credit is not as important for hard money financing, you still may need to show some documentation related to your finances or employment. Be ready with this information ahead of time. Keep in touch with the lender during the application process, and be sure to be available to answer any questions they may have. The lender may be limited as to the amount of money they have available. They may decide to lend the money to whoever seems most cooperative and interested in the process.

5. Protect Your Assets

The hard money industry is not regulated in the same way that banks are. Be sure to get an attorney to review your paperwork and protect you. The lender should give you all the details of the loan, like the exact repayment schedule and amounts, terms, interest rate and fees.

Make sure to get proper insurance for your property. The lender will probably require you to have the property insured since the property is the collateral for the loan. 

Don’t do any business under your own name, since that could expose you to losing all the assets you own if something goes wrong. Instead, see a lawyer and set up a business such as an LLC or S-corporation. That way, your business assets will be separated from your personal assets.

Plan ahead for loan expenses such as closing costs, appraisals and fees. You don’t want to be caught short of cash at a crucial time. You will probably have initial expenses connected to the property you are purchasing, too. A good financial plan is essential.

6. Make a Plan for Repayment

Hard money financing is designed to have short loan terms. Most of these loan terms are for one year, although occasionally terms can be as long as five years. Make sure you have a plan for how you will repay the loan when its term ends. If you plan to flip the property, you will need to have the property sold by the time the loan ends. Otherwise, you will have to get a long-term loan lined up for when the hard money loan ends. If all else fails, you might need to get another bridge loan after the first one ends.

Advantages of Hard Money or Bridge Loans

You might wonder why someone would want to take out this type of loan. Here are some of the advantages:

  • You can close deals quickly. The short approval process means that you can take advantage of a great real estate deal before it’s too late. After you have some experience with a certain lender, your next project may be approved even more quickly. 
  • Hard money lenders are more flexible. They can work with you on loan terms and rules for the loan. The requirements are not as stringent as they are with a bank offering conventional loans.
  • They work great for real estate flipping or developing a real estate project to sell. The short-term nature of these projects makes them ideal for financing with hard money.

Disadvantages of Hard Money Financing

There are also some disadvantages of this type of financing. It is not necessarily right for every type of project or investor. Here are some of the disadvantages:

  • The interest rates are higher than with conventional loans. However, this is not so bad if you only need financing for a short time and take an interest-only loan.
  • The short term of the loan is a disadvantage if you need longer-term financing. It means that you have to look for another loan quickly. Still, the hard money financing will help tide you over until you find a longer-term loan.
  • Since the hard money financial sector is not as regulated, you have to do your due diligence and make sure you find a reputable lender to deal with.

For many real estate investors in Florida, the advantages of hard money financing outweigh the disadvantages. These loans can help you to pursue real estate projects that would otherwise be out of your reach. Once you understand the process, you may find that hard money lenders can be easier to work with than a bank would be.

Call Us to Find Out More

HML Solutions is experienced in hard money lending. We are ready to discuss your real estate projects with you whenever you are ready. Call us today to find out more about what types of financing we can offer that will fit your needs. Our loan specialists will be glad to answer any questions that you may have.

Hard Money Loans for Your Construction Projects

Financing your real estate business can be a stressful, overwhelming process, especially if construction is involved. At HML Solutions, we’re here to make financing easy. Many traditional lenders consider construction lending to be a risky process, causing loan officers to spend a great deal of time reviewing project details before they can determine if they want to extend financing. By the time the process is wrapped up, you’ve likely spent hours of time going back and forth with your lender and signing pages of paperwork.

If you’re looking to have quick access to capital to fund your construction or real estate project, working with a traditional lender may not be the right option for you. The process can be time consuming, resulting in project delays and other issues. You may also miss important deadlines, which may be costly for your overal budget. As a business manager, every dollar counts and is important to help keep you on track and avoid missing important deadlines. Rather than work with a traditional lender, consider financing your project with a hard money loan, which can help you stay on track and within your budget.

Hard Money vs Traditional Construction Loans

Real estate investors need capital to fund their projects. With the changes in the market in recent years, it’s become more difficult for developers to reach out and obtain the capital they need by working with traditional lenders in a timely fashion. At the end of the day, real estate investors need money to help their projects succeed. In addition to market changes, the increasing regulatory requirements on banks result in an increased amount of paperwork and documentation, which have resulted in longer closing times. 

Hard money loans, however, shine in this respect because they provide developers with an alternative to traditional funding. If you’re looking to meet a fast deadline and don’t want to wait on traditional lenders or government programs to receive funding, exploring the option available to you through hard money lending may provide you the best option for your project. 

How are Hard Money Loans Funded?

Traditional construction loans are funded by financial institutions such as banks, hard money loans are instead funded through investors and investment groups working with hard money lenders. You’ll have greater flexibility with a hard money loan since they aren’t funded through a traditional banking institution, which must meet strict regulatory requirements.  

When you work with a hard money lender, your construction loan is secured through a higher interest rate than one you might receive from a traditional bank, but in return the process will move much quicker than other financial institutions. Your lender may also require you to invest some of your own money into the project. The amount you’ll be required to invest depends on factors such as the project and your overall project experience, but you can typically expect to invest anywhere between 10 to 20% of the overall project cost.

Banks can often take several weeks to approve construction loans, and if you choose to work with a HUD financing program it may take months. With a hard money loan program, however, depending on the scop of your project you can close in days. Because of the quick turnaround on approval, developers may choose to work with hard money lenders over their traditional banks because their projects are on strict deadlines and don’t have the time to spend working with their bank to obtain a traditional loan.

Considerations

As with any business financing, there are several considerations to keep in mind if you look at hard money and traditional construction loans. Some of the most common questions include: 

  • Your timeline: Your overall project timeline is one of the most important factors to keep in mind for any entrepreneur who works in the real estate construction industry. Financing your project can often be the difference between taking advantage of a great deal or completely missing out on it. However, to ensure overall success, keep in mind that timelines can vary depending on the lender for approving and funding a construction loan, and hard money loans tend to be much quicker than traditional lenders. If you’re running up against a hard deadline, a hard money loan may be the best option. Hard money construction loans can often be funded in as little as one week, whereas traditional lenders can take up to 30 days or more before you’ll receive the money you need. If you take the application process into consideration as well, the entire process can run an additional two to four weeks with traditional lending institutions. The application process for hard money loans can often be completed in as little as one to two days.
  • Your loan structure: Your loan structure is another consideration to keep in mind when it comes to determining which loan type is best for your needs. Often, you’ll find traditional lenders take a one-size-fits-all approach to construction loans and don’t consider individual needs. The loan terms and conditions are set in stone with very little room to meet specific loan requests. Loan committees aren’t interested in examining the individual needs of customers and want their loan officers to consider projects that meet their rigorous requirements, with the only exception for long-standing bank customers with a proven track record. In the case of a long-standing relationship, lenders have a little more room for flexibility, but may take more time to complete special requests which still come with conservative loan terms. When you work with a hard money lender, you’ll often find much more flexible loan contract and repayment terms. This kind of loan allows the lender the flexibility to structure the financing in ways that benefit both parties. Hard money lenders can also offer several repayment schedules which are often structured to meet unique needs of borrowers, which can work within project deadlines.
  • Will you qualify: Receiving a loan approval is the most important factor to keep in mind when it comes to construction loans, and there are several reasons a builder may be denied for a traditional loan. Even builders with a strong financial background may still have difficulties securing a loan if a traditional lender finds something during the application process that shows them you may not meet their rigid set of requirements of a conventional loan. This may include anything from insufficient paperwork or having a history of self employment. In contrast to a traditional lender, hard money lenders are able to look at more than simply the borrower or company’s financial history in question when evaluating a loan application. Instead, a hard money lender considers factors such as your ability to repay your loan and the overall scope of the project. Because hard money lenders take a look at the bigger picture instead of a set criteria, they’re often able to fund a wider range of construction and real estate projects than traditional lendrs are able to.
  • The local factor: Another factor investors and borrowers often neglect to consider is what’s often called the local factor. With more frequent bank consolidations and buyouts, finding a local lending option can be even more difficult when securing funding for a project. Many national lenders work out of local sattelite offices, which makes it difficult to develop and maintain a close working relationship. Because they aren’t invested in their community and have no personal or local contact, if you have questions or issues with your project, you may end up spending time playing phone tag or hunting down someone who can answer your questions. 

Which is Right for You?

When it comes to determining if you want to finance your project with a hard money or traditional lender, deciding on which option depends on several factors. If you have a history of being denied traditional loans, then it may be difficult to secure financing for your construction or real estate project. If this is the case, then hard money may be the best solution to help you fund your project. You may also choose a hard money loan if you need more flexibility than a traditional lender offers. Many builders also consider timeline when making a determination for which lender is the right choice. If you’re up against a tight deadline and need to move quickly on an opportunity, you may not want to spend a lot of time going back and forth with a traditional lender, since conventional loans tend to be much slower to approve and fund than hard money loans. 

Remember, finding the right loan type for your project depends on the overall scope of your project, your individual circumstances, long-term priorities, and what terms you think will work best. Carefully consider these options before making a decision and talk to the right lender to help you reach your project goals.

To keep your construction projects on track toward completion, consider a hard money loan, which can give you access to capital fast. At HML Solutions, we’re equipped to help you with your construction loan or any other financing options you may be looking for. We’re happy to discuss your options with you to help design a financing package to yield long-term success. Give us a call today to find out more.

Why South Florida CRE Investors use Hard Money Loans for Property Rehab

Now is a good time to invest in South Florida real estate. With a hard money loan from HML Solutions, you can have the funds to meet all your property rehab goals. Unlike traditional banks, our funds come from private capital. We remove the middlemen, making it that much easier and quicker for you to get your money.

Here’s how it works: first you apply for a loan and receive approval 24 hours later; second, we help you create a construction budget and payment schedule; third, we disburse the funds according to the schedule. If you need loans for rehabbing or modifying existing properties, thereby increasing their value, then we want to hear from you.

Understanding Hard Money Versus Traditional Loans

Hard money loans require collateral. For a rehab loan, this will be the value of the property being rehabbed. This allows HML Solutions to structure loans in South Florida without focusing solely on credit. We can also move quickly and get you the money faster which is crucial for picking up real estate deals at the right time.

Terms for hard money loans are usually shorter than bank loans and have higher interest rates. It’s important to remember that since the property itself is the collateral for the loan if the borrower defaults the property is forfeit to HML Solutions.

Advantages of a Hard Money Rehab Loan

With higher interest rates and the chance of losing the property, you may wonder why a hard money loan is a good idea. The number one reason is speed. Banks may take weeks to approve your plans. HML Solutions takes just days, allowing you to act fast in a competitive fix and flip marketplace. Other benefits of working with us include:

  • Fair payment schedules
  • Flexible terms
  • One-on-one guidance
  • Personal interest
  • Quick turnaround and approval

Requirements of the Borrower

We like to see borrowers who have construction or rehab experience in South Florida. It’s not required, but it does help with loan approval. You also need good business plans and a clear way to make money with the project. You should be able to answer questions such as how much capital you need, what are the construction projections, and what is the completed property’s projected value?

Is a Hard Money Rehab Loan Right For You and Your Project?

If you are an experienced real estate flipper in South Florida and have a need for speed, a hard money loan from HML Solutions may work well for you. The ability to close on a project in a week, thanks to a hard money loan, can make all the difference. 

As a private lender, we are less strict regarding rehab loans. Our terms are more approachable and we work diligently to ensure that you are getting the best hard money loan option.

Contact the HML Solutions Team For Your Next Project

Reach out today to talk to our experienced team. With their rehab knowledge, they can guide you through the hard money loan process and towards success.

Why Businesses in West Palm Beach Use Bridge Loans

There are a lot of different loan types out there, but are you familiar with bridge loans and the benefits they can offer you? Here at HML Solutions, we pride ourselves on our reputation as a trusted provider of bridge loans in West Palm Beach, Florida. We can help you understand whether or not this type of loan is the right solution for your current or future needs. Small businesses often choose this type of loan when they only need short-term financial assistance that they know they can pay off quickly.

How Bridge Loans Differ From Other Loans

If you’re looking for a standard loan, a bridge loan isn’t the right solution for you. A bridge loan isn’t meant to provide long-term financing. Instead, it’s meant to bridge a financial gap (as the name suggests). In fact, most bridge loans have maximum terms of 12-months, so you need to be sure that you’ll be able to pay yours off within that time. If you have any doubt about your ability to pay off your bridge loan within the specified time period, a long-term loan may be a better solution for your needs.

But there are certain situations when bridge loans work very well. They can be used to gain access to the money you need without unnecessary delays. Because they’re associated with less paperwork than traditional loans, bridge loans typically offer approvals more quickly than other loan types.

Benefits of Bridge Loans

Here are some of the reasons small businesses like yours decide to take out bridge loans in West Palm Beach, Florida:

  • They often provide funds in as little as 24 hours
  • They don’t require a long approval process
  • They help you keep your businesses working as it should while you figure out a long-term lending solution
  • Immediate influx of cash to put toward any purchase or pressing business need

As you can see, most of the benefits of bridge loans involve the speed with which they are approved. When you’re in a situation that requires you to come up with a large lump of cash fast, there’s arguably no faster way to get it than by taking out a bridge loan.

Potential Drawbacks of Bridge Loans

Though there are many benefits to getting a bridge loan, there are some potential drawbacks as well. You should be aware of these drawbacks so you can decide whether or not it’s still worth it for you to take out a hard money loan. Here are a few of the potentially negative aspects of taking out a bridge loan:

  • High interest rates
  • Usually require collateral
  • Short repayment period

When you apply for a bridge loan, you’ll discover that the interest rate associated with the loan is higher than that of a standard loan. This is partially because bridge loans require the lender to put in a lot of work. It takes effort to process a loan so rapidly. Additionally, most bridge loans require some sort of collateral. You’ll also need to make sure you can repay your loan within a short period of time. But if you’re in a situation that requires immediate cash, the benefits of a bridge loan may outweigh these drawbacks.

Best Situations for Bridge Loans

Small businesses use bridge loans for a variety of situations. For example, a bridge loan can help a business purchase a piece of real estate without going through the normal lengthy mortgage process. A bridge loan can help businesses take advantage of great real estate deals while they wait for long-term financing.

Without a bridge loan, you might have a very difficult time purchasing the right piece of real estate for your business needs. That’s because the real estate market tends to be very competitive, and if you don’t have the ability to purchase a piece of property right away, someone else probably will. Don’t worry, you can still work on securing a regular mortgage loan, but a bridge loan will give you the rapid funds you need to avoid missing out on a great real estate opportunity.

Another common scenario for bridge loans is when cash flow is tight. If your business is waiting for a number of large invoices to be paid, a bridge loan can help you meet payroll, purchase inventory and take care of other essential needs while you wait for your invoices to be paid. Once they’re paid, you can immediately put the cash toward repayment of your bridge loan. This is a wise thing to do so you aren’t stuck with fees and penalties for allowing your bridge loan to go unpaid past the end of its term.

Finally, if you’re in the middle of a round of fundraising, a bridge loan can help you in the interim. For example, if your company is in the process of raising a round of equity financing, but the funds aren’t expected to come through for another year or so, a bridge loan can help you meet your obligations in the meantime. While you wait for your funds to come through, you’ll still need to pay for rent, payroll and inventory. A bridge loan can provide you with the financial flexibility to stay in business until your fundraising is secured.

What You Should Know About Bridge Loans

At this point, you may be thinking a bridge loan sounds great and is exactly what your company needs. But before you apply, there are a few things you should know.

Bridge loans do tend to have higher fees and expenses than you would expect from a traditional loan. This is because the lender has to work very hard to provide you with the immediate funds a bridge loan provides. But you should consider the long-term gains your business will receive by getting an immediate influx of cash that will help you purchase equipment, real estate or inventory you might not be able to afford otherwise. There are situations where a bridge loan will put you in a much better financial situation down the road, so it’s important to think of the long-term game rather than focusing on higher interest rates in the short term.

Typically, you’ll be required to put some sort of collateral against your bridge loan. Sometimes, a bridge loan provider will simply ask for a first position lien on your assets. You may also be required to provide a personal guarantee that you intend to pay the loan off in good faith. Be aware of the collateral requirement before you apply for a bridge loan.

Often, you can receive prepayment incentives for paying your bridge loan off early. Check with your loan provider to see what incentives you can earn by paying your loan off as quickly as possible. You may be able to avoid extra accrued interest or receive a prepayment discount. Most importantly, make sure you meet the repayment terms so you can avoid paying unwanted fees and penalties. You never want to go past the agreed-upon repayment period for a bridge loan. To make sure this doesn’t happen to you, take time to ensure that you have a way to receive the funds you need to pay the loan off before it comes due.

As with any other type of financing, a bridge loan can help you meet your financial obligations as well as your business goals. However, just because it’s an available option doesn’t necessarily mean it’s the best option for your business. That’s why it’s important to learn as much as you can about how hard money loans work so you can determine if they are right for you or if you should go with another type of loan.

Finding the Right Bridge Loan Provider

When it comes to getting a bridge loan in West Palm Beach, Florida, small businesses have a lot of options. Here at HML Solutions, we work very hard to structure the most flexible and fair bridge loans on the market. We also take pride in how fast we close on our bridge loans. Our primary goal is to get the money to you as quickly as humanly possible so you can meet your business goals.

If you’re looking for a loan provider who will explain the pros and cons of bridge loans in minute detail, we won’t disappoint you. We want to make sure you understand the benefits as well as the potential drawbacks of any loan before you apply. When you’re well-informed of your loan options, you’re more likely to make a choice that’s the best fit for your professional needs.

Discover Whether a Bridge Loan Is Right for You

If you’re still wondering whether or not a bridge loan is right for you, please don’t hesitate to contact us. Our friendly loan officers are standing by to help you assess your financial needs so you can make an educated decision about the type of loan you wish to take out. To learn more about our bridge loans or any of the other generous loan options we offer, contact us today. We look forward to providing your business with rapid and reliable loan products that will help you meet your short- and long-term needs.