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.

How Bridge Loans Make Property Acquisitions Easier in South Florida

South Florida is a prime location for investing in commercial real estate. Properties ripe for acquisition and rehabbing abound and the demand for real estate is high. The key to success is finding the financing you need when you need it. HML Solutions provides loans for property acquisitions and renovations. These bridge loans give you short-term financing up to three years, after which you can refi or sell the property.

How Investors Can Use Bridge Loans

Bridge loans are commonly used to finance the acquisition of and improvements to multifamily housing. If an investor purchases a 90 percent occupied property with the intention of updating the kitchens and baths, these renovations will have to be done over time. 

The bridge loan allows the renovations to move ahead while the owner organizes long-term financing. When they are finished, the property has more value and the owner can raise rents, making the property more attractive for long-term financing options.

Loans insured by the U.S. Department of Housing and Urban Development are an excellent way to finance a property in South Florida. The main drawback is that they can take a long time to get. A typical time frame for a HUD loan from application to receipt of money is four to six months. That’s just too long for some developers to wait.

A bridge loan can be used for the purchase of the property and paid off when the HUD loan comes in. This enables investors to move quickly on great properties when they show up on the market. HML Solutions will even underwrite the HUD loan application as a part of the process.

Bridge loans are great tools for investors utilizing the Low-Income Housing Tax Credit in South Florida, which can take a year to complete. They can also be used to hold a property while the owners evaluate the resell market. In short, any time an investor needs money quickly, a bridge loan fills in the gap.

Bridge Loan Guidelines

Because bridge loans typically include underwriting for long-term financing, they have similiar credit criteria to other commercial loans. For example, HML Solutions will evaluate factors such whether the market can support a rise in rents. It’s important to ensure that investors can secure permanent, long-term financing at the end of the bridge loan.

Investors are usually required to have 10 to 20 percent equity in the project. You will also need a solid business plan and a good net operating income. If you will be adding value through renovations or raising rents, these things will also factor into the loan.

HML Solutions offers great terms and conditions on bridge loans in South Florida. Most are adjustable-rate mortgages where you will make interest-only payments. If you pay off the loan early, you only have to pay six months interest with a one to two percent exit fee.

If you want excellent leverage for your next property acquisitions, get a bridge loan from HML Solutions. They give investors the time and money they need to bridge the gap between finding the deals and financing the deals.

Using Bridge Loans to Expedite Commercial Property Purchases in Florida

Imagine you’ve found a commercial property that’s exactly what you’ve been searching for, with an impressive price tag that you know will attract competition. You don’t want to miss out on the property due to lack of funds, but you also know you can’t risk taking out a traditional loan because you don’t have time to wait for it to go through. What do you do? Fortunately, here at HML Solutions, we have a loan product that’s perfect for this type of situation. Our bridge loans make it easier to expedite commercial property purchases so you don’t lose out to someone else who already has funds available to snatch up the property you want.

Bridge Loan Details 

Like other types of commercial loans, bridge loans require the borrower to have a good credit profile. However, unlike other loans, bridge loans are always intended to provide short-term financing. The advantage of a bridge loan is that it is generally quicker and easier to obtain than permanent financing. Thus, it can “bridge” the gap between your current lack of funds and approval for long-term financing.

Here are a few more details you should know about our bridge loans:

  • They usually have adjustable rates
  • They typically have interest-only payments
  • Some may have an “exit fee” due when the loan is paid off
  • You may be able to receive a loan for 90% loan-to-cost

Though bridge loans typically have higher fees and rates than other types of loans, they may still be worth it for certain situations. Due to the speed with which they can be obtained, they may be able to help you make property purchases that you’d otherwise be unable to make.

How to Use Bridge Loans

There are two main situations when bridge loans are ideal: value-add propositions and deals that require immediate purchasing power. Most commonly, bridge loans are used to help acquire multifamily property that requires upgrades and renovations. When 90% or more of the building is occupied, such upgrades will need to be made a little bit at a time. Bridge loans can help provide the short-term financing required for these projects.

People also commonly turn to bridge loans when they want to facilitate financing they’ve received through an HUD-insured loan. If you find yourself in a situation similar to this, a bridge loan may be the ideal short-term solution for your needs.

A bridge loan can also give you more time to evaluate the market if you’re not sure whether you want to refinance or sell a stabilized property you already own. In short, a bridge loan can buy you time so you can make the best investing decision.

Contact Us

If you think a bridge loan sounds like something you’re interested in, we encourage you to contact us. We’ll have a conversation with you to discuss your financial needs and make sure the benefits of a bridge loan outweigh the associated risks and costs. We encourage you to contact us today and request a quote or ask us about the many different loan products we offer. We’ll help you determine which financial solution is the best fit for both your short-term and long-term financing goals.

Why Florida Entrepreneurs Use Bridge Loans for Business

There is a time and a place for bridge loans, but it’s essential for borrowers to know these loans do come with a higher risk than other types of loans. To make sure you apply for the best possible loan solution for your situation, it’s important to learn as much as you can about the structure, terms, timing, benefits and risks associated with bridge loans. These types of loans are commonly used for business mergers because they are so quick and easy to obtain. Here’s why Florida entrepreneurs commonly use bridge loans for business, even though they come with higher fees and interest rates than most other loans.

Why Bridge Loans Appeal to Florida Entrepreneurs

Securing a bridge loan quickly may be the best way to avoid missing out on business opportunities. Since timing is everything when it comes to taking advantage of a good business merger opportunity, most borrowers won’t bother with traditional loans that can take weeks or potentially months for approval. Depending on how good the deal is, it may be unavailable by the time traditional loan approval is granted. 

That’s where bridge loans come in. Though they are associated with complex loan terms, they do offer rapid funding. This rapid arrival of funds can help entrepreneurs avoid missing out on an acquisition opportunity that is likely to be snatched up quickly. Any wise bridge loan applicant should know, though, that the associated fees and interest rates can make the balance of the loan tricky to pay off. That’s why it’s extremely important to make sure the projected financial benefits of the acquisition are sufficient to pay off not only the original amount of the bridge loan, but all fees and interest associated with the loan. 

How Bridge Loans Are Structured

A typical bridge loan is structured to provide very short-term financing (typically less than 12 months) with the primary role of filling a financial gap. Usually, this gap is filled once the borrower secures permanent financing or receives sufficient cash to pay off the loan through the sale of another owned property. The interest rates associated with bridge loans varies, but is primarily based on the credit profile of the borrower. The better the profile, the lower the interest rate, and vice versa. 

However, no matter how pristine the credit profile of the borrower may be, the interest rate associated with a bridge loan will almost always be higher than the rates associated with long-term forms of financing. Additionally, such interest rates tend to trend upward over time, though they may be subject to a cap. 

Bridge loans typically convert automatically into term loans or bonds if they are not paid off within their stated terms. Generally, these term loans or bonds have a maturity of anywhere between five and 10 years. they also have higher interest rates than other loans with comparable terms. When a bridge loan converts to a loan with a longer maturity, the borrower may be required to pay liquidated damages. 

Other notable features of bridge loans include the following:

  • Securities demand. This gives the lenders the right to require that the borrower refinance the bridge loan by using the capital markets to issue long-term debt securities. When the securities demand conditions are met, the control of the long-term financing market timing is given to the investment bank. Sales process requirements, timing, and number and size of the securities demands are all points of negotiation. 
  • Securities demand failure. If the securities demand fails to provide enough funds to fully repay the bridge loan, borrowers and lenders usually negotiate solutions. Generally, the lender will request the freedom to increase the interest rate on the bridge loan to the highest allowable rate or modify the terms of the loan to include defeasance. Other solutions may include defaulting under the loan or payment of a rollover/conversion fee. 

Borrowers may also seek to limit the repercussions of a securities demand failure by requesting a provision that permits them to refuse a potentially adverse securities demand. 

Bridge Loan Fee Structures

Borrowers who have never taken out bridge loans before are encouraged to learn as much as they can about the fee structures associated with such loans. Potential fees include the following:

  • Funding fee. This is a fee that is payable on the closing date of the bridge loan. In the event that the bridge loan is refinanced before it matures, some lenders may partially refund this fee, depending on the time that lapses between funding and repayment. 
  • Commitment fee. This fee is typically payable whether not the bridge loan is funded or not.
  • Duration fee. This periodic fee is added to the bridge loan’s outstanding balance. Sometimes, the duration fee increases over time. 
  • Bond underwriting fee. Underwriting a bond to take the place of the bridge loan typically comes with an associated bond underwriting fee. 
  • Conversion/rollover fee. This type of fee is typically applied if the bridge loan is not refinanced when it reaches the end of its initial term and goes through the long-term financing conversion process. Usually, the conversion or rollover fee is equal to an underwriting fee which would have been applied to the loan if it were replaced in a bond offering. It is possible that the funding fee could be eligible for a refund based on when the bridge loan is repaid once the initial term ends. 
  • Deal-away fee. This fee applies to the lenders on the loan closing date if any other financing source is used. It’s designed to help compensate lenders for fees they would have received if a bridge loan was used. 
  • Refinancing fee. If the loan is refinanced before its initial term is over, a refinancing fee may be applied. This fee is usually equal to the conversion or rollover fee. 
  • Administrative agent’s fee. If the loan is syndicated, the lender usually receives an administrative agent’s fee once the loan is funded. This fee may be applied annually for the life of the loan.

Some of these fees could overlap others (such as the bond underwriting fee if the same investment bank that issues the loan places the bond offering). To avoid unexpected fees, it’s very important for borrowers to carefully review and analyze the terms of a bridge loan before closing. It is also important for borrowers to make sure a bridge loan and its associated fees are outweighed by the benefits associated with acquiring the money quickly to engage in business mergers or for other professional deals or goals. Though they are associated with higher costs and fees than some other types of loans, bridge loans are still ideal for certain situations that require financing to be obtained very quickly. Without this option, many entrepreneurs would likely find themselves unable to act quickly enough on business deals to obtain their goals. 

Flex Provisions

Market flex provisions in fee letters may be a viable option for sponsors who know how to fully negotiate underwritten commitment letters that have multiple arrangers and lead lenders. These flex provisions can apply to bridge loan commitments and allow for broad discretion in regard to varying the terms of financing. Capital market conditions, leverage, sponsor relationship and other factors can determine the scope of flex rights. However, in applicable situations, loan terms such as maturities, price, financial covenant calculations and structure may be subject to flex.

Determining if Bridge Loans Are Right for You

Astute borrowers should understand that bridge loans aren’t the best solution for every situation. However, when time is of the essence and a deal needs to be made quickly, short-term loans like these come in handy. It’s important to try to seek the best terms when it comes to bridge loan financing to ensure the benefits of this type of loan outweigh the increased initial costs. With negotiation and knowledge, borrowers may be able to limit their risks. Here at HML Solutions, we always give high priority to the needs of our borrowers. As with all our other loan products, we structure our bridge loans to be as generous as possible.

Our primary goal is to help our borrowers secure financing that is the right fit for their current needs. We’ll sit down with you to make sure a bridge loan is truly the best option for your current situation. If we don’t think it is, we’ll recommend one of our other leading loan types. You’ll find that we are very easy to work with and have some of the best rates and terms in the industry. You’ll also find that working with a private lender is often more rewarding and enjoyable than working with a big bank. 

Contact Us

If you need financing to help you merge with another business or meet your pressing entrepreneurial goals, we can help. Whether you apply for one of our bridge loans or select another financial product from our impressive portfolio, we’ll be happy to walk you through the application process. We’ll answer any questions you have about our various loan products and explain their benefits and terms to you in detail. To get started, contact us today during regular business hours or reach out to us through our online form at your convenience. We look forward to meeting your financing needs!

Using Bridge Loans for Business Acquisitions in West Palm Beach, FL

If you need a loan quickly and you don’t have time to wait for traditional loan approval, a bridge loan from HML Solutions may be the right solution for you. This type of loan offers very quick approval, but it’s only designed to be a short-term loan. Unlike most other types of loans, bridge loans do come with higher interest rates. That’s why they’re generally only recommended for certain situations, such as for business acquisitions. So if you want to acquire another business but you don’t currently have the cash flow to jump on the opportunity, a bridge loan can help, though you should be thinking about how you can pay it off within the short loan term allotted to you. 

How Bridge Loans Work

Before you decide to apply for a bridge loan, there are some things you should know. Here are our bridge loan basics.

  • Approvals are fast and provide you with cash flow in a pinch.
  • This is not the type of loan to apply for if you need long-term financing. However, it can bridge any financial gap you have while you wait for permanent financing.
  • Generally, the cost of a bridge loan coincides with the loan term. The shorter the term, the less expensive the cost of the loan.
  • Bridge loans come with a variety of fees, high interest rates and high collateral. That’s why you should make sure you’ll be able to come up with the money required to not only pay off the loan, but all fees and costs associated with it.
  • Collateral for this type of loan can typically include inventory or real estate.
  • Borrowers with good credit scores and low debt are likely to receive better bridge loan interest rates than borrowers with poor credit scores or high credit card debt.
  • Open bridge loans don’t already have funds lined up for loan repayment.
  • Closed bridge loans already have funds lined up for loan repayment.

If you have questions about applying for a bridge loan, we’d love to answer them. While this type of loan isn’t ideal for all situations, it can help you avoid missing out on appealing business acquisitions due to lack of funds.

Questions to Ask Before Applying for a Bridge Loan

Before applying for a bridge loan, here are a few questions you should ask yourself:

  • Do I really need a short-term loan solution, or is there a different type of loan that would be more appropriate for my situation?
  • Are the fees and collateral associated with this bridge loan worth paying? Will the business I’m acquiring be worth the risk of taking out a bridge loan?
  • Am I lining up long-term financing that I can use once I pay off my bridge loan?

Once you honestly answer these questions, you’ll have a better idea about whether or not a bridge loan is truly the best option for your current situation.

Learn More

We’d love to talk to you more about the process of applying for a bridge loan and determining if this is the right loan solution for your needs. Contact us today and we’ll help you schedule your obligation-free consultation.

Using Hard Money Loans for Foreclosure Auctions in Florida

Real estate investing is a high-risk opportunity. There is no way to guarantee a profit at the end of a project, especially when dealing with investments at a fair market value. Distressed properties, however, provide the opportunity to secure profits in the front end because their value is significantly diminished, allowing for large gains.  Unfortunately, when dealing with distressed properties, like foreclosures, there is the potential for hidden problems. When securing these properties through auction, the issues become inherited. 

Despite the risks, many real estate investors still see foreclosure auctions as a significant opportunity, but the availability of financing options also limits that. While investors typically rely on traditional and private funding to bankroll projects, allowing for sustained liquidity, increased leverage, and managing concurrent projects, auctions restrict most financing options, especially those most beneficial to the frequent investor.

Auctions of Foreclosed Properties Do Not Permit Hard Money Loans

A common misunderstanding is that a hard money lender, like HML Solutions, can approve a purchase loan. However, that belief goes against the fundamental and operational principles of hard money lenders. The money we lend is specifically tied to the real estate purchased. It is impossible to provide a loan against the possibility of a client being the winning bid at an auction. To secure a loan against a house purchased at auction, the real estate needs to go through the escrow process.

To limit any potential risks, a private lender will also require title insurance. Title insurance provides the lender insight into the property, allowing them to understand any obligations or financial risks belonging to the property, like liens. Any problems that could jeopardize the lender’s position become caveats to possible loan approval.

Since escrow and title insurance are not available at a foreclosure auction, hard money loans aren’t either. Auctions require all cash.

The Definition of All-Cash Bids

When an auction stipulates “cash offers only,” that does not imply bidders must come to the auction house or site with suitcases full of cash. Instead, an all-cash auction requires bidders come with cashier’s checks. 

A cashier’s check is a bank-backed and funded check, meaning the bidder legitimately has the funds they are bidding with. Before an auction, all bidders are required to show the signed and authenticated cashier’s checks to the auctioneer.

Strategies for Using Hard Money Loans on Foreclosure Auction Properties

It is impossible for a hard money lender to directly fund an auction property. However, there are some options – three specifically – for securing funding after a successful bid.  

  1. Cash out refinance after the auction: Unfortunately, there is no direct way to use hard money loans for auction purchases. However, if an investor has the cash for the bid and purchase, they can use cash out refinancing after the acquisition of the real estate. You can use a hard money loan once the property is yours to re-establish your savings, increasing overall liquidity.
  2. Cash out refinance on existing property: If you already own another piece of real estate, it is possible to obtain a hard money or bridge loan to acquire the funds to purchase an auction property. The loan is not against the foreclosure but the existing ownership property. A private lender, like us, will assess the existing property, and if approved, transfer loan funds into your account. You can then use those funds to bid on and acquire a new property.
  3. REOs listed on auction websites: Finally, there is the possibility that an investor can purchase a bank owned or real estate owned property directly through an auction website. While you will not often find such opportunities, some do exist that allow for the direct purchase of a property that failed to sell at auction. In specific situations, a seller might consider a buyer with other financing options. Hard money loans are often accepted in these rare situations.
    The reason a hard money loan might be favored in these situations is the speed of the transaction. Conventional loans typically come with significant caveats that can slow the approval process and hinder ownership transitions. However, to know if a hard money loan is acceptable for direct purchases through an auction website, you might need to contact a representative directly.

Advantages of Purchasing Through an Auction

Have you ever heard the saying, “you make money when you purchase a property, not when you sell it?” While the sentiment is lost on many amateur real estate investors, more seasoned professionals will understand that a real estate project hold promised value early in the process, but only if you can buy below market value.

Purchasing real estate – residential or commercial – is always a risk, but that risk increases the closer to market value the purchase price is. Think about it: if you buy a house for $190,000 in an area where property values hover around $200,000, your potential profit is limited to $10,000, and that is barring any significant problems with the property. However, if you find a foreclosed property and secure a winning bid at $100,000 in the same area, your potential gains shoot up to $100,000, allowing room for unforeseen problems.

It is the unforeseen problems and the cash-only offers that make auctions such a lucrative opportunity. See, few investors are willing to bid or purchase a property blind, meaning without prior knowledge of history, liens, damage, etc. Even fewer investors have the funds to make all-cash offers and take on the increased risks. Because of these two factors, capable investors can often purchase properties significantly below market value, almost guarantee a backend profit.

Drawbacks To Purchasing Real Estate at a Foreclosure Auction

Buying real estate at auction comes with unavoidable risks. Some of those issues are seen as drawbacks to the process:

  • No inspection
  • “As is” purchase
  • No title insurance
  • Hidden problems (Existing tenants)

Most real estate auctions do not allow on-site or interior inspections. A bidder can drive by the property on their own, looking at the exterior and attempting to assess the structural integrity of the property, but that only provides a limited insight. For example, while the exterior might look tip-top, the inside could be missing essential and expensive elements, like cabinetry, appliances, flooring, etc.

The main problem with purchasing at auction is that once the sale is done, it is final. You inherit the good and the bad. You do not get to request repairs or ask for opt out clauses. The purchase means you have to deal with the problems, and hope they don’t result in a financial loss.

Auction purchases are a gamble. The lack of title insurance means you have no insight into liens, unpaid child support, back taxes, etc. Worst yet, as the winning bid, you are responsible for any debts that transfer with the property.

Beyond debts, you are responsible for dealing with any remaining tenants, squatters, or previous owners if they are still residing in the residence. With any luck, they will leave peacefully with the need for law enforcement.

Risks Versus Reward

Is a foreclosure auction the best place to purchase real estate? There is no denying an auction provides the best chance to increase profit potential through below market acquisition. However, the risks involved do limit the applicant or bidder pool to only those who can afford potential financial losses.

That being said, any investment presents its risks. As an investor, you need to weigh the pros and cons to determine whether the gains outweigh the cons. 

Securing Funds To Encourage Quick Turnaround

One of the most intimidating aspects of auction purchases is the all-cash requirement. Many investors do not have capital available for a cash bid and then construction costs. Thankfully, hard money loans provide a quick solution to cash-strapped investors.

While you cannot use a hard money loan to purchase an auction property, you can use a cash out refinance to quickly re-establish liquidity.  With funds available, you can make any improvements or changes to the property and get it back on the market as a rental or sale to repay the loan and secure your profit.

Advantages of Hard Money Loans Over Conventional Loans for Real Estate Projects

Real estate projects require fast turnovers. Unfortunately, speed is not synonymous with most conventional lenders. There are three reasons most real estate investors work with hard money lenders over traditional options:

  1. Flexibility
  2. Speed
  3. Approval odds

Here at HML Solutions, we pride ourselves on being able to customize solutions for each of our clients. We do not expect every project to fit into a neat little box or adhere to predesigned repayment schedules. We view every loan and client as individual, taking into account project specifics. We do not approve or deny loans merely based on the creditworthiness of the applicant because we place more importance on the property value in question. Because hard money lenders do not adhere to the same stringent regulations as conventional banks, applicants can see rapid approvals, with many receiving funds within a week of approval. 

Are you interested in learning more about how a hard money loan could help you with an auction purchase? Contact an HML Solutions specialist for more information.

The Benefits of Using Hard Money Financing for Commercial Real Estate in Florida

If you are looking to invest in commercial property in the Sunshine State, hard money loans may be your best financing option. While traditional loans have definite advantages, hard money loans are highly accessible and may allow you to close your next deal as soon as possible. Consider a handful of ways hard money financing may benefit you as a commercial real estate investor in Florida.

Quicker Closings

One of the most profitable features of hard money loans is the fact that they often take a fraction of the time to close in comparison to a traditional loan. Because Florida is such a popular place for tourists and relocating families, it’s essential that you be able to put money down on real estate as soon as it becomes available. With hard money loans, you may be able to avoid missing out on a favorable opportunity due to a pending loan approval.

Easier Applications

Another perk of hard money loans is that the application process is much simpler. This is largely because these lenders do not need as much information or supporting documentation as a traditional lender might. This way, you don’t have to worry about accessing your personal financial data, such as tax returns or proof of income.

Increased Likelihood of Approval

Because hard money lenders focus on the value of the property you are investing in rather than your credit history, you have a greater chance of being approved for this type of loan. While this does mean that the lender acquires the property if you default on your loan, it allows you to secure the financing you need to get started. This is an especially favorable feature for investors with credit problems or those who have been previously denied by traditional lenders.

More Connections

A more subtle advantage of hard money loans is that they allow you to engage in a bit of networking. This goes to say that your lender may be able to finance future projects or even point out good opportunities as they become available. This may prove to be a valuable connection as you develop your real estate business. 

Greater Flexibility When Making Multiple Investments

A final benefit of hard money loans is that they allow you to invest in more than one property at a time. If you take out a traditional loan, there is a good chance that you won’t be able to receive funds for new projects until your first loan is paid off. Hard money lenders are more likely to allow you to take out a second loan as necessary. This is just another way hard money loans help you seize opportunities as soon as they arise.

Contact HML Solutions

Hard money loans may be a bit pricier than traditional loans, but they make up for this added cost in many ways. If you need convenient, flexible and efficient financing, a hard money loan may be the best option for you. At HML Solutions, connecting commercial real estate investors with financing solutions is one of our specialties. Give us a call today to set up a consultation and begin discussing the loan process.

Financing Property Renovations in Florida with Bridge and Hard Money Loans

It doesn’t matter if you’re just beginning your fix and flip business or have years of experience, having access to hard money loans can be a vital resource to ensure your fix and flip is a success. If you’ve always wondered what hard money loans are and how they work for fix and flip investment properties, here you’ll learn more about the basics of these loans and how they work as part of the hard money lending process. You’ll gain a better understand of why you may want to use a hard money loan, how they’re different from other traditional lending, and how to obtain a hard money loan when you’re ready. 

About Hard Money Loans 

A hard money loan is often used for rehabbing properties that are used for rental or commercial use. This is much different than a traditional loan that a homeowner may use for their personal residence. Hard money loans are often provided by private companies rather than traditional banking institutions or mortgage brokers and, unlike other loans, may be given on a short-term basis that can range up to six months. If you work in the fast-paced world of property fixing and flipping, this makes hard money loans ideal for your rehab projects which are often completed over a short term.

If you’re interested in scaling your investment properties incrementally rather than all at once, a hard money loan is a great tool to have as it allows you to rehab an investment property without the headache of putting down a lot of upfront capital. These loans are beneficial because they minimize the amount of money entrepreneurs have to worry about putting into a property on their own.

While there are a lot of factors to consider when flipping a property for resale, such as the price, potential renovation costs, contingencies, and the cost to list and sell, having a hard money loan can defer some of these costs so you can rehab multiple properties at once with little risk. 

About Fix and Flip Properties 

A fix and flip property is a way to build wealth over a short term. As a borower, you seek out discounted properties to renovate, then sell your newly-flipped property at a profit. This process typically takes six months to complete from start to finish. If you want to scale your real estate investment portfolio without putting down a lot of money upfront, a fix and flip hard money loan may be a great option to help you build wealth.

Keep in mind, there are some factors to consider when obtaining a fix and flip loan, such as closing time, property value, and the your overall financial plan. Fix and Flip hard money loans are fast and efficient regardless of the property’s condition, which means you’ll have a great potential to make a profit if you have a well-executed property enhancement, or rehab plan. 

Traditional banks or mortgage brokers may find fix and flip projects to be a risky loan to add to their balance sheet, which may result in unfavorable loan conditions that can affect your overall profit margin. If you’re considering a hard money loan to back your fix and flip project, you should carefully consider your lending source to be sure you’re set up for success and a healthy bottom line after you sell. 

The Basics of Fix and Flip Hard Money Loans

Now that you understand what a hard money loan is and how it can be beneficial, it’s time to understand more about fix and flip loans. Fix and flip loans are often used for short-term property rehabilitation projects that real estate investors purchase specifically to rehab and turn around and sell for a profit. 

When considering a hard money loan for a fix and flip investment, there are some factors to consider, such as the time it will take to close on your loan in relation to your project timeline and what the loan covers in relation to the cost of your renovations. Hard money loans from private lenders typically close faster than traditional banks, sometimes in as little as 3-5 business days. Because time is crucial for fix and flip projects, having a fast turnaround can make a difference in the overall success of the project. 

When you obtain a fix and flip loan from a hard money lender, you’ll typically receive financing amounts that covers 100% of the property purchase if you’re at around 75% of the value minus repairs. The amount of the loan you can use for your rehab project varies depending on the loan type and lender, and the additional loan value can be based upon the ARV, or after repair value. Taking the future value of the property rather than its current value at purchase can help your project be a success. 

Hard money loans are great options for rehabbers because hard money lenders often provide higher amounts than traditional lenders, who usually cap the ARV at or around 70%. We offer financing over the ARV basis, typically at around 75%, to provide fix and flippers with extra capital to cover anything that may come up. 

If you close on a loan at or below 75% of the ARV, it would allow the loan to be more stable and and provide you with more equity to design a profitable deal for your fix and flip property. Before you consider a fix and flip property investment, take your financial expectations into consideration and work with your hard money lender to be sure your project scope is realistic. 

Remember, a hard money loan is a great resource to have for your investment but doesn’t guarantee a large profit margin or, at worst, any profit at all. however, it does guarantee that your project will receive a second look which can be a huge benefit to your overall rehab success. When you work with us on your hard money fix and flip loan, we have a system in place that will fact check your finances to be sure that any loan you obtain is safe even during uncertainties or downturns int he housing market. Our fast, efficient process is designed to help with your loan requests. 

How to Obtain a Hard Money Loan

If you’re thinking of taking out a hard money loan, you should know the process is different than traditional commercial or residential loans. If you’re used to the traditional lending process through a financial institution or mortgage broker, you may think you know what to expect. However, the application process is slightly different and consists of several steps. 

We don’t want the process to be a source of stress, however. We offer a variety of resources to educate you about our loan application process. One part of the application process that sets us apart from our competitors is you can quickly and easily apply right online, which streamlines the entire process from start to finish. 

The hard money loan process consists of several steps, including:

Pre-approval:  Your first stop in obtaining a hard money loan for your fix and flip property is to get pre-approved and go through the borrower underwriting process. If you apply with us, you can find the application right on our website and can fill it out electronically to get started. 

We provide underwriting to help ensure you receive the right loan for your needs. We’ll work with you to learn about additional requirements, such as a credit and background check, and we’ll want to obtain bank statements and tax returls to help facilitate a smooth lending process that will give you the best possible loan for your fix and flip project. 

If you work with a hard money lender and they don’t offer borrower underwriting as part of the hard money loan process, it could be a disadvantage to you and your overall success. Hard money lenders who don’t offer underwriting services often carry riskier loans with a higher foreclosure rate, which can be detrimental to you over the long term. You may also face higher costs because of added legal and administrative fees, which often get passed on to borrowers. 

We consider your level of experience with fix and flip projects when we work with you on your loan. We’ll learn about your past experience with rehab projects, see what contracting experience you have, and if you have any other skilled trades or training certifications you may have that could affect the project’s success rate. Our process is thorough, and we collect all potential client information so we have everything we need to help you successfullyl flip properties. The more information we have up front, the higher your overall success rate with your rehab project. 

Property underwriting

Once you’ve been pre-approved for a hard money loan, we begin the property underwriting process. Whenever you work with a lender on a residential, commercial, or hard money loan, you’ll be required to go through a property appraisal before your loan can be issued. In most typical cases, the appraisal can cost anywhere from $400-$600 to complete, which many rehabbers view as a setback in the rehab process. 

We understand the financial burden that the cost of an appraisal can create, so we offer a unique service to our clients where team members provide these appraisals at no cost to you. Our team of appraisers actively own and manage rental portfolios and flip properties, so they have a deep understanding of the real estate market in relation to your rehab project needs. As property investors, our appraisers work as advocates ensuring your overall success. 

Not only is it important you receive appraisals from experts who understand the market, we also invite you to be present at all appraisals. Together, we work through the proposed fix and flip property and ensure your project plan, overall scope, and financials make sense and will provide you with the highest success rate. 

Tips for Success

Some general tips to ensure your overall success when entering the world of property fix and flipping: 

Startup costs: If you’re wondering how much money you should invest out of pocket to flip houses, of course the lower the purchase and rehab costs are the more stable your loan. You should always have a good plan when you seek funding to fix and flip a property. While it is technically possible to flip properties without investing any of your own money, it can show a lender you’re serious to have some cash available to put into a project.

Upfront capital: If you obtain a hard money loan, you may not need to fund as much capital up front because of the low down payment requirements. However, it is helpful to have emergency money set aside to cover any unexpected expenses during a property rehab. A good rule of thumb is to have enough money set aside to cover interest-only payments over a 6-month period in case your rehab project costs more than you expect.