Should you get a hard-money loan for your business or your real estate investment?

The term hard money loan refers to a real estate loan that is based primarily on the equity in the property, rather than on the borrower’s credit or proof of income.

Calculating the cost-benefit

A hard money loan comes with a higher price tag in terms of interest rate, fees, and terms (some lenders will require the loan to be paid off in just 2 to 5 years. So, why would anyone consider a hard money loan? Because there are times when the cost-benefit calculation makes sense.

When you can't count with a bank

Anyone can go through a time when it’s not possible to rely on the credit score or proof of income to get a real estate financing loan. A business also may be going through a difficult phase cutting on the marketing budget further decreasing its ability to find new customers/clients.  Staff is been reduced, payroll is suffering. New products and services need to be created and launched; or the purchase of a real estate property for the business would solve many other problems. All these things require money and, sometimes, to get a bank loan is nearly impossible. In times like this, when good opportunities show up and a traditional loan from a bank is not an option, hard money appears as a handy short-term solution to higher financial returns.

Equity Based Loan

If an individual or company has or will have equity in its properties, they can borrow against this equity to get the needed financing.

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