How to Get a Hard Money Commercial Loan

Hard money commercial loans are short-term, private lender loans and are easier to obtain than typical bank loans because these hard money lenders specialize in high-risk lending. Of course, the consequences of having to get a hard money loan are higher interest rates, fees and penalties. If you're shopping for a hard money commercial loan, here's how to get one.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

• Tax returns for two years
• Credit score

1. Gather your taxes. Most hard money commercial lenders will require you to provide at least two years of business and/or individual tax returns. This is used for the lender to assess the financial success of your business.

2. Get an appraisal. If the property you're looking at needs improvement, that's OK. Hard money lenders often ask for the "as is" value and the "as improved" value of the property.

3. Prepare a Letter of Intent. Hard money lenders want to know how you plan on using the property. Give specific details about property usage such as rental income you expect to receive.

4. Obtain a copy of your credit report. Though hard money lenders don't look as closely at your credit score as traditional financial institutions, they often base things like points and interest rate on your credit score. Often, the lower your score, the higher the interest you'll pay on a hard money commercial loan.

Tips & Warnings

• Figure out your loan-to-value (LTV) ratio before applying. Hard money lenders do not give 100 percent financing loans, they give loans based on a maximum loan-to-value, generally between 65 to 75 percent of the value of the property. Figure this number out to see if the maximum LTV is enough to finance your project.
• Do not forget these are short-term loans. Hard money loans usually have a term of one to three years and are offered as a way of allowing the borrower time to secure traditional financing with more favorable terms.

Resources

• Take a look at the various hard money loans offered by 3ecapital.com.
• Shop for commercial hard money loans at mountainfunding.com.