A common point of contention in the realm of real estate lending is the difference between hard money versus asset-based lending. Asset-based lending describes any business loan that is secured by means of assets or collateral, which encompasses a variety of different options. Therefore, a hard money loan fits within this definition as this type of loan is secured with real property. The terms of a hard money loan are primarily based on the value of the property used as collateral, and while the interest rates are less favorable than a traditional loan, they are an excellent way to raise needed cash quickly.
Benefit of Hard Money
If hard money loans require one to put their property on the line and utilize less favorable rates, why are they even considered as an option? This has much to do with the ability to obtain a hard money loan, as they are much easier to secure than a traditionally backed bank loan.
Hard money loans are procured from a non-bank lending organization, an individual, or bank, and as such do not rely on the credit history of the borrower. Aside from delving into your credit history, banks will also want to see your financial statements, personal working experience, education, proof of income and what you have to offer for collateral, to name a few. This overbearing process can make obtaining the loan frustrating, which is why many elect the more easeful route of a hard money loan.
Optimal Situations for Hard Money
The term loan shark is often associated with hard money lenders and there are certainly examples of hard money lenders taking part in despicable business practices. However, banks can be viewed as much the same in that they also benefit from a borrower defaulting on the loan and collecting the collateral. Risks are present when borrowing money regardless of the lender, so here are the situations in which a hard money loan may be more suitable:
1) Investors lacking the necessary cash funds to take advantage of a fleeting opportunity with low risk and high reward
2) Investors that have established less than desirable credit through previous failures
3) Investors looking for a faster way to raise capital because their time is better spent engaging in their business instead of working with the bank on the loan procedure
4) Opportunities with swift deadlines
5) When more cash is needed than the bank is willing to provide
Asset Based Lending Through EMCAP
If any of the five previously mentioned situations apply to you and you’re considering a hard money loan, we can offer you a better alternative. EMCAP Lending provides asset-based loans for real estate investors, providing many of the same benefits as hard money loans but from a trusted source and for more favorable rates.
We are able to offer better rates by utilizing technology and industry resources to determine property values and base loans more efficiently off of the underlying asset value instead of credit history or your personal income.
EMCAP Lending is dedicated to providing investors with distinguished and efficient service to meet lending needs. If you are looking for an alternative to traditional bank financing and want to avoid the riskier route of hard money lending, give us a call at 1-833-56EMCAP (1-833-563-6227), or email us at borrow@emcaplending.com.
