How to Become a Hard Loan Broker

Regardless of the state of the economy, people and businesses always need loans. Those borrowers who are not overly welcome at banks need "hard money" loans. Usually identified by a poor credit report, these borrowers still want funds and hard money lenders exist to fill this need. A hard loan broker can make substantial income putting borrowers and hard money lenders together.

Difficulty:

Moderate

Instructions

Things You'll Need

• Computer
• Internet connection
• Website domain name

Become a Hard Loan Broker

1. Learn about local laws, regulations, and licensing requirements. While there are few federal government requirements, individual states often have a variety of requirements, particularly in the area of licensing. These can vary widely. Those concentrating on brokering mortgage loans often face strict licensing requirements. However, those brokering commercial loans may need no licensing at all.

2. Contact hard money lenders. These are often private companies or individuals who concentrate on making hard loans at high interest rates, which compensate for the massive risk they undertake. These lenders typically are receptive to hard loan brokers who refer borrowers to them. They often pay direct fees to the broker. Make agreements with these lenders before starting a hard loan brokerage business.

3. Decide on the best method of marketing the business.There are thousands of potential clients, but they must know the business exists. Some successful hard loan brokers simply place small ads in one or more newspapers, generating many borrowers. Client volume is important, as these loans are challenging because of the credit quality of most borrowers.

4. Design a simple interactive website to establish credibility for the new business. This need not be sophisticated, as the borrower needs to provide some confidential information to receive a hard loan. This is better accomplished via telephone or in-person meeting. Do provide a "Contact Us" page, requesting a minimum amount of information (name, telephone number, email address and space for a brief summary of the loan request).

5. Design some stationery and business cards. While digital contacts now predominate, when dealing with loans there remains a requirement that most communications be in writing. Therefore, at least, basic stationery is necessary to build an audit trail of loan communications between broker and borrower.

6. Prepare basic agreements to be used with hard money lenders and borrowers. Both sides of the equation are equally important. Do not depend on oral agreements when brokering loans. Should a dispute require a court appearance, oral agreements provide little protection for the broker. Consult a legal professional for advice or original written agreements. Loan and consulting fees are the primary income source for brokers. Protect them.

Tips & Warnings

• Prospective brokers who have no prior experience in personal, commercial, or mortgage loans should use the Internet to gain knowledge of how the process works and the typical requirements to make hard money financing a reality.

• Learn the major federal loan regulations regarding required disclosures (showing annual percentage rate, fees, closing costs) and other requirements to protect borrowers.

• Don't display greed. While hard loans allow for higher fees than good credit loans, excessive charges sometimes cause deals to be impossible to complete.

• Don't "cut corners" or tamper with any borrower information. Experienced hard money lenders are aware of the typical borrower credit deficiencies and the high risk involved. Maintain integrity with both borrowers and lenders to help ensure success.

References

• HardMoneyFunding.com: Hard Loan Broker Program
• BloodHoundRealty.com: How to Be a Hard Money Broker
• PrivateMoneySource.com: Example of Hard Loan Broker Lender Fees

Resources

• BankRate.com: More Information About Hard Money Loans and Lenders