Are Hard Money Loans Right For Your Small Business?

hard money loans

5 steps before you apply for a loan determine if a HARD MONEY LOAN is the right option your small business.

Have you watched the Shark Tank? Inventers, entrepreneurs and small business owners stand in front of a panel of rich sharks and for ask money. Usually, these owners are asking for money in exchange for a percentage of their business. Sometimes these business owners want the mentoring, name recognition and connections of these sharks but much of the time they just need an infusion of money to take their business to the next level.

When they do get a shark to bite after the due diligence is completed most get an infusion of hard cash, no interest, just equity. This is one way to get the money you need to build your business.

Most business owners will never get to the Shark Tank but many businesses need that same infusion of cash and frequently they do not want to give up any equity. Though hard money loans are not cheap, sometimes they might be the right choice to benefit you and your business.

Hard Money Loan Basics

When you are choosing a Hard Money Loan you want to understand that interest rates will usually range in the two-digit numbers and are meant to look scary.  However, a hard money loan can quickly infuse needed cash into your business, usually only for a few months. Hard money lenders will usually approve loans within a matter of days.  Typically, loans can range from $5,000 to $500,000 with very limited documentation.

Some common reasons for using a hard money lender:  meeting payroll, hiring additional staff, purchasing new material or inventory, purchasing equipment, expanding facilities, or new business opportunities.

Lenders will not fund your loan if they do not feel secure with and understand your cash flow.  To avoid this disconcerting situation, do some homework before you apply for any business loan.

Key action items to consider before applying:

  1. Business type:  It is important to work with lenders that have funded previous businesses in your industry.  Request specific examplesand get their success stories.
  2. Credit:  How do they look at your personal credit?  Many hard money lenders will not focus as much on personal credit as they do on revenue and cash flow.  Therefore, understand their guidelines on credit before they start pulling your credit report.  Each hard pull does have a negative impact on your score. Banks and legitimate lenders will always evaluate the entire creditworthiness and business picture before funding a loan.
  3. Terms:  Make sure you are aware of the terms of the agreement.  Many hard money loans are short term and expensive, with high interest rates.  Find out if there is a pre-payment penalty to pay the loan off early.
  4. Fees:  Legitimate lender fees should be disclosed clearly and prominently.  Be always on the lookout for any hidden fees or costs. Ask the lenders to provide you with the overall costs and monthly payment.  Always know what you are signing.  If you are not sure, have your attorney review the documentation.

If you are considering a Hard Money Loan consider these next steps:

  1. Review your finances with your accountant.  It’s important to know where your business stands, especially if you are seeking out capital.  It is extremely important that you know how and when you can pay off this loan.
  2. Get all necessary information from the lender.  Don’t be afraid to ask any and all questions from your lender.  Lenders need to provide you with all the details you request so that you can make the right decision for you and your business.  Even if you think the question is not important or irrelevant, ask anyways.  You don’t want to learn an expensive lesson.
  3. Make sure that the hard money loan makes sense and that you are comfortable with the repayment terms.  Understand all the repayment terms.  Ask worst-case scenarios.  Find out what will happen if you don’t repay the loan back within the terms that have been set.
  4. Create a plan and commit to it.
  5. Speak to a specialist that can provide you more information at no cost to you: Hard Money Loan Specialist

Is a Hard Money Loan A Good Option For You?

Here are a few examples of a few businesses and their experiences with hard money loans

  1. We were a new, startup trucking company.  We were looking for a loan $ 25,000 for the purpose of additional operating capital.  The application process was simple and easy and in just a few short days the money was in our account.  We truly appreciated the help and support.

Mike B. – Trucking Company

One of my creditors knew I had a good business but had some personal issues that made me delinquent with my account. Through a series of phone conversations that occurred on MY schedule, I talked to a loan specialist who thought they could help my business get a loan for $ 100.000. They understood that health issues (your own or a member of your family you must care for) can cause your business to fall behind. They required all the same documentation that traditional banks require, but also took the time to listen to the story of my life and my business. They also discussed what repayment possibilities I thought I could afford and tailored the offers (yes, there was more than one offer) accordingly. They were a GREAT company and I intend to use them again when/if the services are required.

Dr. Lisa S. – Dentist

I was turned down for a credit card and also a bank loan because of some credit issues. You didn’t give me as much as I wanted but I was able to secure $ 50,000 to buy the supplies and materials I needed. The best part is that it’s improved my business credit since I started making payments.

Barbara D. – Cosmetics manufacturer

My bank line of credit was closed, and my business had been slower over the last few years. But things have started to pick up and I recently received a contract for $ 250,000 that I needed to hire 10 new employees. You asked me some questions about my business and I supplied them with some banks statements and you approved me in 3 days.

David M. – Vitamin Manufacturer

It was such a pleasant experience working with the company in obtaining a line of credit for $500,000 for my company. I must thank them for their professional advice on obtaining working capital to support our growth without any hesitation. I thank them for their advice and support. Looking forward to building a strong business and personal relationship.

Sam J.  Hardware Distributor

Remember, legitimate lenders want their money back.  Their goal is to provide you with resources so that you can grow your business at a cost that is more expensive than normal financing.  The process is very quick but yet very expensive.  If you know that your business can grow drastically and you will have the cash flow to pay it back, this might be a good option for you and your business. Hard Money Loan Specialist

Related articles:

10 Tips to Secure A Small Business Loan

Show Me the Money! 

Better Credit Score Helps Your Business


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