Tag Archives: funding
Business Loans – 7 Reasons Not To Use A Bank (Page 1 of 2)
So you’re a small business owner and you need a business loan to further the objectives of your company. Where do you turn?
When it comes to a business loan or commercial real estate loan, there are many good reasons NOT to turn to a traditional bank. Here are some of the most important reasons. Many small business owners, will find most of these points directly applicable to them.
“THE BANK TURNED ME DOWN”
Of course the biggest reason most small businesses go looking for alternative sources of commercial real estate loans is because they have been declined by the banks. Small businesses are often forced to look for other sources of funding because the banks will not provide it. This is not even listed below, since there are many positive reasons to prefer non-bank funding, EVEN IF YOU CAN get an approval from a bank.
REASON 1 – The minimum loan amount available from banks is too high
In many cases banks will not offer a commercial real estate loan for less than $250,000. So if you only need $100,000 you will be pushed to borrow more than you actually need. Or if your property will not support a $250,000 loan you are out of luck with the banks.
The solution is to look for an alternative funding source that can provide a lower minimum amount. Some commercial financing services will go as low as $100,000, and will often give you better terms and much better service than the traditional banks.
REASON 2 – Many traditional banks will charge you an up-front “commitment fee” just to examine and process your application
Banks usually think they are doing you a favor by processing your application, so they will often make YOU pay for their attempts to win your business.
The solution is to find other established and credible lenders who are eager to offer you better service without charging you a fee for processing your application.
REASON 3 – Most traditional banks will severely limit the amount of cash you can get from a commercial real estate loan.
Banks usually have very narrow rules about where you can use the cash derived from a commercial real estate loan. If you need a cash injection for your business, or want to use the proceeds from a commercial mortgage as a down payment for another property, most banks will not be interested in that type of loan.
Look for a lender who does not restrict your use of the cash derived from commercial real estate loans. Some services, (see links below) can provide commercial loans that give you up to $1 million in cash to use however you want.
REASON 4 – Most traditional banks require detailed business plans before approving a commercial real estate loan.
Many small businesses have business plans, but they are usually not sufficiently detailed to satisfy the banks. As a result, applying for a commercial real estate loan from a bank can turn into a very time consuming and expensive process. Creating the type of business plan that is adequate for the banks will usually cost thousands of dollars.
Hard Money Financing: Your Easiest Alternative
Every time standard banking or financial solutions doesn’t work, people look for the nonstandard, the unique, the not very common, and some will also venture to say, more dangerous decision: hard money funding. As of late, when many has been forced up against the wall, hard money funding or maybe hard money lending is certainly not non-traditional nowadays. It’s been a second or third selection for so many which it has shed its considerably unexplainable or even unfairly given shady and also hazardous status.
Truthfully, hard money funding is quite basic and direct. In a different company, it is about switching an income, even a small one. These days where homeowners cannot meet mortgage repayments and need aid however cannot be eligible for a bank loans, they can get a hard money loan. This style of loan is one that makes use of an asset as collateral to acquire the loan. Whereas a bank will consider a loans risk according to a borrowers financial position, in hard money lending, the financial institution makes certain that they are able to get their money back by selling the asset if a borrower doesn’t pay off the loan as arranged.
Hard money lenders are those companies or individuals that provide with a unique style of money based loans. They can lend money for a reduced period of time as well as ask for a slightly higher interest rate. The recognition of those lenders is actually rising due to the recent lifestyle whereby other people are hard pressed for time.
The financing system as created by hard money lenders South Carolina depends on a percentage of the quick-sale worth of the subject houses. Often, this moves for the 60 to 70 % range of the market value of the property. And yet, dont be confused; “value” here indicates todays purchase price or the amount of money the lender can reasonable expect to earn from the sale of the property in the existence of a loan standard.
Hard money funding is not the first selection for some because they’re undoubtedly rather pricey than conventional loans resulting from not being determined by traditional credit tips that protect traders and also banks from high normal costs. Generally not requiring income proof as well as the same hard conditions that typical finance company demand, hard money lenders have higher default costs, therefore, they think justified in charging a higher charge of interest.
People, no matter whether as individuals or maybe as providers can decide to have hard money funding when they cannot qualify for regular mortgage financing as a result of a bad credit score scores or different complications of the needs.