The Top 3 Benefits of Using Private Money Lenders for Quick Financing!
Growing a real estate business is a smart and almost sure way of building wealth. But it can be very challenging, especially with the ongoing pandemic. Conventional financing options are making it even more difficult for small and medium-sized businesses to access the funds they need to grow their operations.
In the past, business and real estate financing usually came from insurance companies, big banks, pension funds, and government organizations. But these institutions better serve other large institutions and not investors.
Luckily, there are various alternative business financing options, such as private money lenders with less strict requirements and flexible payment terms.
Otherwise referred to as hard money lenders, private money lenders are companies that lend money to businesses and real estate investors. The lender provides funding under a signed agreement that details the interest rate, the term duration of the loan, and the amount of private money loaned out to the investor.
Let’s take a close look at three key benefits you can expect from working with private money lenders like Asset Based Lending.
1. Private Money Lenders Provide Fast Approval
While a traditional bank loan can take weeks of processing, private money lenders provide fast loan approvals that can take days or even hours. This makes private money loans very convenient for real estate investors when a good deal pops up.
There’s also the fact that there’s less paperwork to read and sign. If you’ve ever applied for a loan from the bank, you must be familiar with how boring, tedious, and time-consuming it can be. It slows everything down, especially when you need cash to take advantage of a great deal.
Private money lenders understand this fact very well and will help you get the financing you need quickly and with less trouble.
2. No Hidden Costs
Another benefit that sets private money lenders apart from other financing options is that they don’t include hidden fees in the paperwork. Bank officials tend to superficially explain the loan terms so that you can commit to the loan without fully knowing the fees the bank might have added.
But with private money loans, all costs and repayment terms are clearly stipulated for your understanding.
3. Your Credit Rating Doesn’t Matter
Private money lenders are more focused on the value of the property rather than your credit scores. You can even use the property you already own as collateral to get the loan you need to expand your portfolio.
On the other hand, banks use your credit score to determine your interest rate and the loan amount you qualify for if you even qualify in the first place. Instead of your credit rating, private money lenders prefer to look at the equity within the property.
The Bottom Line
The real estate industry is a relatively fast-moving one. This means as an investor, you may need to act fast and close on a property quickly. But sometimes, you may not have adequate capital to buy a property, and time constraints won’t allow you to wait for a lengthy lending process from the bank (that’s if they even agree to loan you in the first place).
For these reasons and more, many real estate investors turn to private money loans to buy property. A sure way of finding a reputable private money lender is to search for people you know, such as other realtors and real estate agents.