Mar 12
9
Commercial Hard Money Loans: A Survival Tactic
A commercial hard money loan must only be thought of as a solution right after you have exhausted all other sources and have come towards the conclusion that you just will not qualify for a conventional loan. The alternative, even though difficult for a lot of borrowers, is normally uncomplicated. Either lose your commercial property or accept the terms supplied by the hard money lender.
It is simply a survival tactic. You’re giving yourself something extremely useful in exchange for the expense in connection with your potential commercial hard money loan. That important thing is time. Time to repair, time to restore whatever the issues are. Regardless of whether it is getting the small business back to profitability, paying down debt, time to continue leasing out the property, restore personal credit, and so on. We see numerous borrowers let their egos get inside the way and end up turning this into something it is not.
For the most part, it’s simply an act of courage that you simply are facing the challenges head on and undertaking every thing it is possible to to resolve it. And irrespective of how poor it is actually, you can nonetheless have some pride in that. Lots of men and women simply hide and let their issues overwhelm them.
Remember the old sales saying of comparing apples to apples. You just can’t compare a commercial hard money loan to a conventional commercial bank loan you may have been eligible for 3 years ago. You just have to be realistic and compare it to your current options. And here’s what they are: 1) Take on a partner. 2) Lose the business enterprise. 3) Shed your commercial property.
Say you may have a building worth $2,000,000 and owe $500,000. You’ve got $1,500,000 of equity you stand to lose vs. paying for an high priced loan. Or say you take on an inadequate partner mainly because you will be pressed for time and need to have cash. Now you stand to shed whatever equity you may have inside the organization, creating and have additional legal headaches by needing to sever ties with partner. And also if things go well with your partner you may most likely must give up considerably more to the partner than you’d spend in fees to the lender.
Most commercial hard money lenders charge 6% on the front-end of the loan, which is undoubtedly really pricey. Say, making use of the numbers above you wanted an added $500,000 to bring the total loan balance to $1,000,000. You’d pay $60,000 in charges–vs. losing $1,500,000. It is pretty difficult, yet basic. So, please do not let your ego obstruct your commercial real estate financing decisions. Simply face the problem head on, and deal with it.