There are many times when a growing business, or even a struggling business, could greatly benefit from some extra cash. But these are often the times when a company has the most trouble securing Arizona Business Loans. The business, just like an individual, needs to displace stability and creditworthiness to qualify for the loan. When a traditional loan is not possible, turning to hard money can be a game-changer.
Hard money loans are defined as asset-based loans, which means that there needs to be physical property used as collateral on the loan. This collateral can be a piece of property, a building, inventory, or other items which are owned outright and have significant value. The value of the collateral determines the amount of the loan and also if the lender is willing to provide the loan. The borrower’s credit score or credit history is not really a factor, as it would be in a traditional lending agreement.
What might be a shock to many business owners is that these nontraditional Arizona Business Loans carry some much higher interest rates than bank loans. The rates can start at around 12%, and some go as high as a full 30% interest. Also, most lenders are going to charge 5-10 points to carry the paper. But when you can’t secure a traditional business loan, this is a great option to keep your business functioning.
Because these Arizona Business Loans are funded by private lenders, the terms of the loans can fluctuate greatly. Hard money lenders are not required to follow all of the same restrictions and guidelines that traditional lenders must obey. This means that the lender sets all of the terms to his or her own liking. The term of the loan, the payment schedule, and even the definition of a default on the loan are set by the lender. Borrowers need to carefully read all of the loan documents to be certain that they understand their responsibilities so that they do not end up defaulting or paying large penalties or fees.
Knowing that private lenders have much more freedom when writing loan documents and terms, a wise borrower will use this to his or her own advantage as well. Asking for terms that suit your specific needs is not unusual or off-putting to more private lenders. This is one of the features that make hard money appealing and also one that justifies the higher interest rate and points that the borrower is willing to pay. So, give some thought to the length of the loan, the payment schedule, the fee schedule, and even clauses like an early repayment penalty or option to extend the loan term. All of these could be beneficial when you are working to pay back the loan and the larger interest amount that you have agreed to. While private loans can be more expensive, they meet a need for borrowers and pay private lenders the rate that they feel they need to take a greater risk than a bank would.
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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