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4 Steps to Take Before Applying for a Hard Money Loan

Hard money loans have become a popular form of alternative financing. When compared to traditional bank loans, they are typically faster and easier to obtain. Hard money loans are secured loans offered by alternative lenders that, like all forms of secured financing, require collateral. If you’re thinking about using a hard money loan to finance your business, there are a few steps you should take before applying.

4 Steps to Take Before Applying for a Hard Money Loan

#1) Determine How Money You Need to Borrow

You should determine how much money you need to borrow before applying for a hard money loan. No two businesses have the same financing needs. According to the U.S. Small Business Administration (SBA), micro-sized businesses often require just $3,000 to get up and running. Home-based businesses, conversely, require roughly $5,000. But medium- and large-sized businesses can require much more. If you’re going to apply for a hard money loan, you should determine how much money you need to borrow.

#2) Compare Interest Rates

It’s a good idea to compare interest rates before applying for a hard money loan. Interest rates, of course, can vary with all forms of debt-based financing — and hard money loans are no exception. Some hard money loans have an annual interest of 7.5%, whereas others have an annual interest rate of 15%. Regardless, you should compare interest rates from multiple hard money lenders before applying for a hard money loan.

#3) Identify Collateral

Hard money loans require collateral. The use of collateral is one of the features that distinguish them from other, unsecured forms of financing. You’ll need to provide the lender with collateral to secure a hard money loan. Real estate businesses, for example, often use property equity as collateral. If you have equity in one or more pieces of real estate, you can use it to secure a hard money loan.

#4) Choose the Right Term Length

You should choose the right term length before applying for a hard money loan. Term length refers to the duration of a loan. Most hard money loans have a relatively short term length compared to traditional bank loans. You can obtain hard money loans with a term length of just 12 months, for instance, meaning you’ll have one year to repay them. With that said, other hard money loans can have a term length of up to five years.

This article was brought to you by Intrepid Private Capital Group – A Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.

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Intrepid Private Capital Group • May 6, 2021

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