Why Hard Money Loans Are The Best For Entrepreneurs
by Arina Smith Finance 01 September 2021
If you are a small business owner you are dreaming of opening a new company, or you are a burgeoning entrepreneur, chances are you might need to get some financial backing before you can bring your dreams to reality. Just because you have a foolproof business plan, it can sometimes take tens of thousands of dollars to put this plan into action.
And in the case of most entrepreneurs, they haven’t yet had their big break to make thousands – or millions – of dollars. So how do you find this new idea if you do not have the money yourself?
Choose hard money loans as an entrepreneur
First, what is a hard money loan? A hard money loan differs from your typical bank loan in that it is a loan from a private lender that is “backed” by a valuable piece of property, asset, or another item that is worth money. Oftentimes, you will find that hard money loans are backed by real estate.
Since these loans are usually meant for entrepreneurs and businesses that are stuck in a tough situation and need money fast, they are usually short-term only and have higher interest rates when compared to traditional loans. Reach out to Asset Based Lending if you’re in need of fast cash.
Also known as a short-term bridge loan, a hard money loan is basically a non-typical bank lender giving you money for investing in a property or for a business venture. The asset that you are using for collateral typically reduces the risk of paying and not getting anything in return, allowing both parties to be happy with the transaction.
As an entrepreneur who may be wearing their way in the real estate industry, hard money loans are one of the great ways to get money fast. They are used for quick acquisitions of money and quick turnarounds when it comes to looking for properties to buy and sell. Since you can get these loans so quickly with minimal prerequisites, entrepreneurs can use hard money loans to finance a purchase or a flip of a house before they can get a loan from a bank – which has longer wait periods.
But how does a hard money loan work?
If you’re still confused as to how this type of loan works, don’t worry – we have got you covered. Typically, an entrepreneur will use this hard money loan from a private source instead of using a typical bank loan or money loaned from traditional mortgage lenders. By skipping the process of using big companies and big businesses to provide funding, the private investors lend money on the good of your word and with the property you are investing in as collateral. This way, if the deal goes south, the investor has the property to fall back on.
Using hard money loans is a great way for entrepreneurs to get money fast to secure funding for their housing projects. Instead of waiting long periods for a bank loan or from traditional mortgage lenders, this loan is fast, easy to acquire, and works well for those who want to purchase horses, flip houses, or renovate homes.