5 Reasons Commercial Hard Money Loans Are Better Than Bank Ones

Commercial hard money loans are one of the most underrated, underutilized tools in a real estate investor’s arsenal. After all, they can be harder to find than traditional bank loans. As such, they’re lesser known.

Surprisingly, though, hard money commercial loans can actually outperform traditional loans in ways the latter simply can’t match. Unlock the hidden benefits of the real estate industry’s best-kept secret below.

Main Takeaways

• Commercial hard money loans are ultra-expedited, asset-based loans for business real estate.
• Borrowers can obtain hard money commercial loans so fast that the loans are often considered cash equivalent. Needless to say, this is a quality traditional loans can sorely lack.
• Commercial real estate hard money lenders stick to shorter repayment terms than traditional ones. In turn, this allows investors to put the lending period behind them quickly.
• Unlike traditional loans, commercial hard money loans aren’t restricted to specific uses.
• Good hard money lenders don’t just fork over loans like traditional ones do. In addition, they individualize the loan process so that the borrower’s loan goes as far as possible toward meeting their specific short and long-term investment goals.

Table of Contents

• What Are Commercial Hard Money Loans?
• Benefits of Hard Money Commercial Loans Over Traditional Ones
• Things to Keep in Mind When Borrowing 

What are Commercial Hard Money Loans?

Commercial hard money loans are privately funded commercial real estate loans. In essence, Baltimore hard money loans differ from traditional “soft” bank ones because they’re short-term and use assets as collateral.

Benefits of Hard Money Commercial Loans Over Traditional Ones

Most importantly, they have the following unique benefits over traditional loans:

Lightning-Fast Funding

It can take several weeks or months to be approved for a traditional bank loan. This can be outright untenable when you’re racing against the clock, especially to close a competitive deal or meet deadlines.

In such situations, you might need hard money commercial loans. In comparison to traditional loans, hard money lenders can approve your application within days. This way, when a promising opportunity appears, you don’t have to sit, wait, and helplessly watch it pass by.

To put it another way, commercial hard money loans ensure that time constraints aren’t the end-all-be-all, insurmountable obstacle they once were. After all, when investors plan their projects, too much of that planning revolves around working around these limits. It eats up endless time, energy, and stress that could otherwise be spent on project quality improvements and innovation.

Essentially, hard money commercial loans remove these barriers. Rather than fretting about time limits, you can focus on getting things done.

Cash Equivalency

On that note, hard money commercial loans are oftentimes considered to be equivalent to cash. This is another area where traditional loans and hard money commercial ones differ.

After all, having cash on hand offers instant funding as needed. Commercial hard money loans are similar because they can provide funding very speedily. However, unlike cash, you don’t have to drain all your own money upfront to get this advantage. Depending on your qualifications (more on that later), you may simply have to put down a percentage of the purchase upfront, or none of it at all, period. Even better, unlike cash, hard money commercial loans can come with several tax benefits.

Shorter Repayment Terms

Commercial hard money loans have shorter repayment terms than traditional ones. Oftentimes, they can last a year or two long. While this might not be the best fit for some investment types, for others like fix-and-flips, it can be ideal. This setup allows investors to move past the repayment stage quickly and get onto their next venture.

Versatility of Uses

Traditional loans often force you to restrict your use of funds to assigned purposes. Luckily, you can use hard money commercial loans for virtually any purpose under the sun, as long as it’s real estate-related. To list some examples, you can use commercial hard money loans for:

• bridge financing
• construction
• speculative construction
• renovations
• fix-and-flips
• investment property purchases

…or countless other purposes you might think of.

Individualized, Curated Loans

Traditional banks don’t usually offer hard money loans because they work differently; they’re designed to be highly customizable. Instead, local lenders who can offer extensive attention to detail typically handle them.

Good hard money lenders don’t just focus on what they can get from your loan. They work directly with borrowers to ensure the latter maximizes their loan ROI. Then, they weave this philosophy throughout every step of the process, from deciding on loan terms to providing industry-experience-based advice in each stage of the project.

For instance, they prioritize borrowers’ immediate and long-term investment goals, their project’s current obstacles and advantages, and making sure you satisfy your stakeholders. With this, you don’t just get money. You gain valuable support in navigating your investment’s nuances.

Things to Keep in Mind When Borrowing 

Getting a loan is a big financial decision, so you should make sure it’s a mindful, informed one. That said, this is what you should keep in mind when you apply for commercial hard money loans:

1. It’s Primarily Meant for Short-Term Financing: Hard money commercial loans are chiefly designed for shorter-scope investment strategies, not long-term ones. As such, if you use hard money commercial loans as bridge financing, you will want to secure long-term funding when the loan term ends.
2. It’s Property-Based: As we said before, commercial hard money loans are asset-backed loans. By this, we mean that they use the borrower’s property as collateral. So, if you fail to consistently repay your loan, you may lose a notch in your portfolio.
3. It Has Higher Interest Rates: Hard money lenders expedite their loan delivery for borrower convenience, at possible risk to them. That convenience comes at an extra cost. So, you must be prepared to pay for this feature.

Experienced Investors Can Enjoy Up to 100% Financing

All in all, hard money commercial loans have several benefits over traditional loans. You can get cash-equivalent loans in an exponentially accelerated timeframe, with versatile uses, individualized loan processes, and short repayment terms.

However, there’s one big benefit we didn’t mention before. Not all commercial real estate hard money lenders offer it. However, at Maryland Hard Money Loans, we do. We may be able to offer qualified borrowers up to 100% funding if you have:

• Proven track record of real estate investments
• Strong credit history
• Collateralized assets

The better your background, the less money you’ll have to put down—and the more funding you’ll get. Contact us today to be rewarded for your real estate experience and expertise.