Using Hard Money Loans for Commercial Real Estate
Getting the right funding for your commercial real estate ventures can sometimes be tricky, but if you already have a commercial property to use as collateral, then a hard money loan may be the best option. You can use these loans as property investors, real estate builder or as business owners to venture into new areas or industries.
What Is a Hard Money Loan?
A hard money loan is one offered by direct lenders instead of traditional banks and does not have to meet as many strict government regulations as traditional commercial property loans do. These loans use the property as collateral and the lenders focus more on the potential income generated by that real estate than on your credit history. This can make it easier to get a loan if you have a small portfolio or if you have poor credit.
Who Uses One?
Those who can benefit the most from hard money loans for commercial real estate include builders, investors and small business owners who have a property to use as collateral. Because there are fewer regulations surrounding this type of loan, you can borrow enough to purchase the property and fix it up to fit your needs. For builders, this can look like purchasing empty lots for new commercial buildings or even retrofitting older buildings for new purposes. For small business owners, this means being able to open up a second location or even move to a new location while renting out the first one.
What To Use As Collateral?
One of the best pieces of advice you can get as you go into real estate investments is to make sure that you keep ahold of at least one income-generating property as you move forward. This gives you funding for your future projects through both the income and the potential to use the property as collateral for hard money loans and other programs. This can also help you build your portfolio as you look for investors or plan for retirement.
Commercial real estate ventures can benefit largely from hard money loans. These loans are provided by direct lenders instead of banks, so they are not required to hold to most government banking regulations, giving the lenders the ability to evaluate your collateral on profit-generating terms instead of looking at your credit history. This, in turn, can help you get the funding you need to expand your portfolio and grow your business.