Hard Money Commercial!!!

We are starting to close a lot of these loans but I still see a lot of people trying to do loans that make no sense. You need to understand these deals. Hard money does not mean stupid money. THEY ARE NOT FOR LOW CREDIT SCORE PEOPLE. That is one MAJOR difference between commercial hard money and residential hard money. Remember, 50% of all deals in commercial are not fundable.

The private hard money lenders, the guys who really have the bucks to lend $5 Million and close in 2 weeks, are not dumb individuals. Their goal is NOT to foreclose, (commercial foreclosed properties can sit on the market for 10 years), their goal is to get their money back quick with a profit between 13% on the low end to 25% on the high end. That is points and interest rate. The stronger the deal, the less the total points. What these guys are looking for is situations where the borrower needs money quick but only needs it for a short time and has a sound exit strategy or pay back strategy that gets them their money back in less then 2 years. Often, these deals are funding the mortgage payments into the loan.

For example, someone owns a good piece of property and has builders lined up to buy the lots once he gets them developed but needs the money quickly to develop them. Hard money guys can get him 50-70% of the value in a week or two and roll in the mortgage payments and points so the developer gets this thing done with no additional outlay and gets his money in a couple weeks. Or you have a guy who needs to close in 2 weeks or he loses the deal but it is a fundable loan by the local banks. He just needs money quicker then the banks will close. Or any of a thousand types of other scenarios. The thing to look for when screening one of these deals is: 1. A transaction that needs speed. 2. A deal that makes sense. 3. Some exit strategy where the guys loaning the money can get their money back sooner rather then later-almost guaranteed. Saying, "I will use the money to help my credit and then refinance in a year is NOT a hard money deal-they do not see that as a safe risk since so many bad credit people STAY bad credit people.

Again, it is NOT a hard money where the buyer has major credit issues and no real viable plan for re-payment. Where he just needs the money to hold off people, or where the LTV is really high. In residential, hard money is for those really bad borrowers that need to stave off foreclosure. In commercial, they want good borrowers, with good plans, the deals are sound. The story has to work. If the borrower does have bad credit he CAN go hard money in one instance-he has a clear plan to pay off that is nearly guaranteed-such as a contract from another company to buy his property and the company buying it is sound. The scenarios are endless and the good news is that the deals tend to be larger-between $5-$30 million or higher and the closings are quick. We are starting to close a lot of them and we have good lenders for these loans. But they must make sense and the story has to fly.

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The above information regarding Commercial Lending was provided by Christopher Hills, the Senior Vice President for In-Vision Financial Holdings, LLC. Chris can be reached via email at chris.hills@in-visionfinacial.com or by phone at 508-377-5872 x 704.

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