Financial Articles

Hard Money Commercial Lenders are located throughout the US. However, almost all who advertise themselves as hard money commercial lenders are, in fact, hard money commercial lenders’ brokers.

The difference between a broker and a direct hard money commercial lender is the ability to fund. Brokers are financial specialists in the business of connecting borrowers with direct lenders. By and large, the broker community is far more effective at advertising to the general public than direct lenders. Brokers collect loan requests, assist applicants by providing lists of information and paperwork that will be needed to process the loan, locate an appropriate hard money commercial lender, and forward the borrower’s information to that lender. The borrower and the lender rarely have personal contact. It is in the broker’s best interest to keep the borrower and the direct lender separate and to keep the name of the direct lender secret from the borrower. The broker’s value lies in his/her lists of direct lenders. If everyone had access to the list of direct lenders, borrowers would opt to deal the direct hard money commercial lenders for a number of reasons.

• Direct access to hard money commercial lenders means

• Lower cost of the loan – no broker fees or points

• Faster answers – the direct lender does not need to string you along while looking for an appropriate lending source. If your deal is ‘do-able’, direct hard money commercial lenders will tell you instantly. If not, they may be able to direct to you a source that is more appropriate

• Faster closings – direct communication is always better. The faster you get a question, the faster you can provide answers and the faster your selected hard money commercial lender will be able to move forward.
  As with any loan, the most important factors hard money commercial loans is cost and speed. Hard money commercial lenders have loan packages with similarities and – some differences – from loans made by banks or traditional mortgage companies. Hard money commercial lenders will typically work with higher loan to values, ranging from 50% - 75% of the value of the property. The higher the risk, of course, the higher the rates and points you should expect to pay.

If your loan request is what one might call a ‘near-bank’ loan – a loan that the bank almost said “Yes” to, you will do well to work with a hard money commercial lender who specializes in ‘near-bank’ deals. They offer the lowest rate in the non-conforming real estate lending industry. However, as soon as you leave the traditional mortgage options, expect points and rates to be substantially higher.
Here are some terms you are likely to find offered by hard money commercial lenders:

• Loan terms from one to three years
  In rare instances, longer terms may be available

• Higher interest rates than found in bank or traditional mortgage financing
  As of the writing of this article, Avatar Financial Group is offering the lowest rate I found among hard money commercial real estate lenders: 11%

• Higher points, which may be required to be paid in advance
  Avatar Financial is offering their 11% loans with 3pts. Working through a broker will add 1-3 additional points to the cost of the loan

• In order to make a bridge loan for a commercial real estate project viable, Avatar Financial offers options such as wrapping of points or a portion of the interest into the loan, yielding lower monthly payments, and/or structuring loans with balloon payments to coincide with re-financing plans.

What to Do When Selecting Hard Money Commercial Lenders

Interviewing Hard Money Lenders
First determine whether the companies you are speaking with are direct hard money commercial lenders or brokers. Many firms will indicate that they are BOTH brokers and lenders. Unless your loan is very small, you will likely be working with the company in their broker capacity. Brokerage companies are notoriously reticent to tell you that they will broker your loan.

Be persistent; be clear. Make it plain that you need to know whether the company will fund the deal internally or 'participate' in the loan, 'refer' the loan, or 'work with a partner firm' to fund the loan. Look for other euphemisms that mean that the company is a broker. You may wish to require it in writing. At least you are more likely to get an honest response and make an informed decision concerning the hard money commercial lenders you are interviewing.

Ask for references. This will be difficult and you will likely be told that the information is confidential. However, if you have approached a reputable hard money commercial lender, they will consider asking one of their satisfied clients if they may share that’s client’s phone number with you. You can then contact the client and speak frankly about the service, the costs, the timing, etc.

Ask your peers. The last thing anyone talks about at dinner is money. They will discuss personal matters, theology, and politics before they discuss their personal or business finances! If this is your experience, join business organizations, network groups, etc. in your field. Ask people at those meeting privately. Arrange to make an announcement from the podium. Indicate that you are seeking a reputable hard money commercial lender and would appreciate any information anyone in the room has – good or bad. The more borrowers speak and share the information they have, the more effective and efficient hard money commercial lending will be for everyone

Be Prepared. Generally, time is of the essence for the closing of your loan. Therefore, it is wise to be prepared. Hard money commercial lenders will require that you have significant equity in the property you use as collateral. If you have 35% or more equity in the real estate, you are ready to proceed. Gather information about the property, including proof of your equity.

• Download an application from the Internet and review it. Make sure you are prepared to provide this information when requested.

Check with Better Business Bureau and your state’s attorney general if you have any doubts about the honesty of the hard money commercial lenders you approach. Hard money commercial lending is among the least regulated financial industries in the US. Being well prepared and confident about your financial partner will make your hard money commercial lending experience go smoothly, quickly, and successfully.

Advantages of working with Avatar Financial Group

• Hard money loans cost less at Avatar
  
  Avatar Financial Group is an institutionally funded REIT (real estate investment trust). We are not brokers. Since you will not have to pay additional points to brokers and sub-brokers, your hard money loan will cost less.

• As a direct hard money commercial lender, Avatar funds faster
  
  Avatar Financial Group has the money to fund– we do not have to ask investors; we do not need to call around to funding institutions. Brokering a loan takes time. You can avoid that wasted time by going direct to Avatar, where hard money commercial lenders turn for funding.

• Avatar Financial Group makes it easy
  With Avatar, you know where you stand. We make the funding decision ourselves. If we express interest, you have the decision of the funding institution. We have nothing to gain by ‘stringing you along’ in hopes of finding a funding solution elsewhere. If we need more information or explanations, we will communicate directly with you. Direct communication is better communication and results in faster, more efficient funding.

• Working with hard money commercial lenders does not mean having to put up with harsh manners
  
  One of the most common complaints from borrowers who work with hard money commercial lenders/brokers is the service they receive. In an industry rife with rough manners and poor service, Avatar Financial Group enjoys a reputation for expertise coupled with civility, professionalism, and personal care. You'll find working with Avatar Financial Group a refreshing change from ‘business as usual.’

If you or your firm is interested in obtaining a quote for a hard money commercial loan, please contact Avatar Financial Group toll free at 888.886.0097. We will review your request immediately and make a determination about funding your project and the costs involved without delay. There is no obligation; we are not brokers. If we move forward, Avatar Financial Group will be the funding source for your project.