Hard Money Lenders Filling the Banking Void

Online, May 11, 2011 (Newswire.com) - Hard money lenders are fast becoming an avenue for even the most well qualified borrowers to obtain financing. With the recent tightening of the credit markets, banks and institutions are either unable or unwilling to make loans they have made in the past. This leaves many well qualified borrowers with no loan options.

All California Lending places hard money loans in the state of California. According to them, inquiries for hard money loans have increased sharply since the turmoil in the financial and real estate markets has started. Additionally, the composition of borrowers they have seen has changed.

No longer does the average borrower have a sub 500 credit score. In the current market conditions, it is much more common to entertain hard money loan requests from borrowers with excellent credit. The reasons for this stem from the difficulty in obtaining financing through the banks. Many of these borrowers are either being turned down, or the process is taking longer than they are able to wait.

One segment that seems to be growing in popularity is rehab loans. These so called "fix and flip" loans are short term hard money loans made to investors who are picking up bank owned properties under market value, rehabbing them and then reselling them at market value.

While hard money lending is available when institutional financing is not, there are still restrictions. Typically the loan to value a hard money lender is willing to lend caps out in the 60% range, which is substantially less than bank guidelines. Another restriction is the cost, points are charged on this type of financing, and interest rates are often in the double digits.

In exchange for these restrictions, borrowers get access to funds that they could not access through traditional means. Dealing with alternative financing often times allows individuals to speak directly with the decision maker. Due to this, guidelines are not black and white, if a transaction makes sense for both parties, typically the financing gets done. With no red tape or faceless underwriters, hard money offers true transactional lending.

While it is not perfect, hard money is an option for those in need of financing. These days, that need is more common than many may think. Especially for those whose business depends on the ability to borrow money, it is important that these options exist. As the saying goes, it is not cheap money, but it is less expensive than a partner!