Have you ever seen one of those late-night TV commercials pushing easy-to-get government-backed small business loans for anyone who thinks he has an entrepreneurial idea? Don’t believe them. It is incredibly difficult to get a conventional small business loan. More than one frustrated borrower has called the process ‘draining’.
They Will Look Into Everything
There is so much to the frustrations of obtaining conventional business loans that it is difficult to know where to start. The fact that lenders look into nearly every aspect of a borrower’s life is as good a place as any. To say lenders leave no stone unturned just doesn’t do it justice.
Lenders need to look into absolutely everything. They need to look at a borrower’s income and credit. They need to look at business profits and losses. They need to look at current debt load, future business prospects, and on and on. Having to keep up with everything lenders want during the approval process can be exhausting.
Document Requirements Can Seem Endless
If looking into every aspect of a borrower’s life isn’t bad enough, lenders require a ton of documents. So much so that new document requests can seem endless. And then what if a lender asks for some sort of documentation the borrower cannot furnish? The nightmare only gets worse.
Borrowers often find themselves furnishing everything from P & L statements to several years’ worth of tax records. Banking statements, credit card statements, etc. – they are all on the table.
Just When You Think You’ve Made Them Happy…
Perhaps the most draining thing of all is believing you have finally made a conventional lender happy only to get one more phone call about yet another problem. It is one more hurdle to conquer; one more hoop to jump through. The thing is that all those little things add up to an endless river capable of carrying you swiftly away.
Do not misunderstand. Conventional lenders have their reasons for doing things the way they do. And where would the world be without conventional business loans? It’s just that obtaining one often feels like it is more complicated than it needs to be. But there is an alternative in hard money.
Hard Money Lenders Do Things Differently
Obtaining hard money loans is rarely as draining for the simple fact that hard money lenders do things differently. According to at least one of them, Salt Lake City’s Actium Partners, lenders do not need nearly as much paperwork. They also don’t have to do a deep dive into a borrower’s finances. They can approve loans faster without requiring nearly as much.
How do they get away with it? By basing approval decisions almost entirely on asset value. Simply put, borrowers put up assets as collateral. If the value of those assets is equal to or greater than the amount being requested, approval is normally forthcoming. Most hard money loans can be approved and funded with little more than a completed application and an asset appraisal.
Hard Money Is for All Sorts of Needs
All sorts of business needs can be addressed with hard money. In Actium’s case, the majority of their loans go to finance commercial property acquisitions. They also lend for business expansion and debt restructuring purposes. Likewise, there are other lenders who fund property development, fix and flips, and other needs.
Conventional lenders do things one way while hard money lenders do them another. But where conventional lending is often draining on borrowers, hard money lending tends to be significantly easier. Maybe that’s why so many business borrowers prefer hard money lending over conventional business loans.
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