Universal Business Structured Solution creates a new innovative way to provide borrowers with Out of the Box Financial Solutions for a Hard Money Loan.
A hard money loan is a type of financing through which a borrower receives financing secured by the value of Real Estate. These loans are typically issued by private investors or companies. Because of the higher risk, Interest rates and closing fees are typically higher than conventional financing, but provide a borrower with an option of much quicker closing.
Hard Money loan is basically an assets based financing and therefore can be used in bankruptcy, foreclosure, distressed situations where conventional funding is not available. The loan is underwritten primarily based on a value of the underlying collateral, but credit score and income of the principals still will be analyzed. Usually maximum Loan to Value is 65% to 70%, so the principals are expected to bring a substantial equity amount to the closing. Hard Money Lenders typically take a first position, but if seller is willing to hold a note in a secondary position the amount of equity required from a project’s sponsor can be lowered.
Hard Money Financing is a relatively quick funding solution that provides necessary immediate liquidity and usually has duration from a few months to three years and refinanced with a more conventional loan.
Without any sufficient knowledge on the subject, prospective borrowers loose a comparative advantage that would otherwise allow them to:
I. Bring the deal that requires a Hard Money Finance to the Right Funding Sources
II. Negotiate and Close a loan in a timely matter.
Hard Money Financing is an essential element for the future of the business, but considered a very risky loan. Please read the information below and make sure that you have all of the following before contacting any lending source:
1. Value on underlying collateral with a most recent appraisal available.
2. Have a clear exit strategy in place (Saying if anything happens, the building will be sold in the open market- is not a good exit strategy. Having a commitment from a potential buyer or permanent financing in place when properties’ performance stabilizes- is a very good exit strategy).
3. Know asset classes that are accepted by a particular Lender (some lender do not consider non income producing properties, undeveloped land, etc.
4. Most of the Hard Money financed by a Private Capital Source are Interest Only loans with a Balloon Payment at the end. Lenders usually want to see the project’s ability to pay monthly payments and the final Balloon Payment at the loan’s maturity. Be ready to provide the following:
a). Company’s Historical Financial Statements and at least a couple of years of future projections.
b). Information on Company’s assets value
c). Outstanding debt schedule: amount, lender’s name, maturity, interest
d). Personal Financial Statement on all principals
5. Post-Financing Performance:
Be prepared to strengthen and finalize the case with improved Post-Financing Performance.
Before approving a Hard Money Loan a lender must have a confirmation that it will be able to sell the asset in a very timely manner.
Universal Business Structured Solution occasionally gets requests to provide Hard Money Loan collateralized by a hard to finance assets: Raw Land or other non-income producing assets. Is it possible? Yes, but please be prepared to do your job as a Borrower: be ready to prove the ability to pay the loan back with an interest and have a clear exit strategy in place.
Getting a Hard Money Loan puts a company at much greater risk comparing to a conventional loan, so this process has to be very carefully planned and potential risk must be assessed.
Universal Business Structured Solution is equipped with specialized knowledge of the marketplace. By examining every aspect of our client’s business Universal Business Structured Solution is able to engineer affordable financing quickly and efficiently.
iframes are not supported by your browser.