Real Estate Tips |5 min read

Are Commercial Hard Money Lenders Right for You? 10 Signs

Last updated November 13, 2024

Wondering if commercial hard money lenders are the right fit for your real estate project? Here, we’ll walk through the key signs. We’ve created a convenient guide weighing the pros and cons, so you can be more informed as an investor. Read below for more info.

Signs You Would Benefit from Commercial Hard Money Lending
Clues That It’s Not the Right Time for a Real Estate Hard Money Lender

Main Takeaways

You may benefit from commercial hard money lenders if you need fast funding, cash equivalent funding, short and customizable loan terms, or loans you can use for a variety of purposes.
It may not be the time to use commercial hard money lending if you can’t pay expedited delivery fees, can’t use asset-based borrowing, don’t want short-term funding, or don’t have a qualifying property.

Signs You Would Benefit from Commercial Hard Money Lending

If any of these signs resonate with you, you may need to use commercial hard money lending, like Baltimore hard money lending.

1. You Need Funding Fast

Hard money loans are one of the quickest loans in terms of loan delivery. As such, they allow you to access funding within days or weeks. Sometimes, this turnaround could be as short as 48 hours. Because of that, these loans may be your best bet if you need to close on a deal urgently.

2. You Need Efficient Loan Terms

Commercial hard money lending typically has short terms. It commonly lasts just a few months to a few years. As such, you can pay it off and put it behind you quickly. If you don’t want your loan to hang over your head for decades, it can be a great choice.

3. You Need Customizable Loan Terms

Commercial hard money lenders are usually private, local lenders. Because of that, they can directly set their own terms. This makes them more open to negotiation. So, you can work with them to ensure your final loan terms meet your project’s unique needs.

4. You Want Loans That Are Cash Equivalent

Many consider hard money loans to be cash equivalent. After all, cash gives you immediate financing. Hard money loans are the next best thing since they can give you money nearly as quickly.

The only difference is that, with hard money loans, you don’t have to put all your own money down to get that quick funding. At most, you will be asked to provide a fraction of your loan amount upfront. Even better, if you meet certain qualifications, you may be able to waive the entire down payment to begin with.

Get Funded Now!

5. You Need Your Loan for More Than One Purpose

With traditional lending, banks usually order you to limit your spending to designated uses. This can greatly complicate your project’s development. However, with commercial hard money lending, the only rule to follow is that you buy things related to your project. Other than that, you can use them for just about anything. For instance, people can use commercial hard money lending for:

bridge funding
construction or speculative construction
property rehabilitations
house flips
commercial property acquisitions

…and several other uses you might need.

Clues That It’s Not the Right Time for a Real Estate Hard Money Lender

If the following features are an issue, a real estate hard money lender might not be the best fit right now.

1. You Can’t Pay Expedited Delivery Fees

Commercial real estate hard money lenders offer hyper-expedited funding on demand. This speed is among the fastest in the loan industry.

However, such premium features come at a cost. It can be very expensive for lenders to deliver funding in a rush. Due to that, they must offset those costs by asking for higher interest rates. You may need to settle for traditional financing if you can’t pay these convenience fees later on.

2. You Aren’t Ready for Asset-Based Borrowing

Commercial hard money lending requires you to use your property as collateral. Since the lender is at least partially financing your investment, they are invested in it, too. If you repay your loan, you can buy out that stake. However, if you can’t, they’ll have to recover their losses by taking the original investment back.

For borrowers with a solid repayment game plan, this shouldn’t be an issue. However, if you can’t stay on track and organized, you may want to wait to use this strategy.

3. Your Property Doesn’t Qualify

Usually, you can’t use non-commercial properties with a real estate hard money lender. For example, you can’t put a loan on your own home.

As for commercial properties, your collateral property should have either a strong current or after-repair value. You may not be eligible if your property can’t meet that standard. So, keep this in mind when you apply.

4. You Want Long-Term Funding

Commercial hard money lending is designed for short-term needs. For example, if you need money to buy a property, flip one, or fill the gap between funding additions, it could be a good fit. However, if you need funding for years on end, hard money loans might not be for you.

5. You Want Loans That Are Easy to Find

Usually, private investors or local vendors offer commercial hard money lending. Because of that, it can be challenging to find a lender that offers these loans. You may have to search a little more to find them.

Need Commercial Hard Money Lenders in Baltimore? We’ve Got You Covered

Commercial hard money lending might be for you if you need fast, cash-equivalent, and customizable funding. They can deliver funding within days or weeks. They can do it so fast that it’s almost as instant as cash but without the upfront cost. Furthermore, they can individualize their terms for each project. All these qualities can give you the edge you need to get ahead quickly.