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Types of Hard Money Loans
There are many different types of hard money
loans, but three that are the main and most often used. With the many
different clients and the many different needs that come looking for
hard money loans, there are still three main loans that are used more
than any others.
• Bridge Loans
• Credit Enhancement
• Mezzanine
A Bridge Loan is a loan that is used for a short period of time until
permanent financing is put together for the client. Bridge loans are a
perfect solution for business opportunities because they allow the
purchaser or investor to act quickly. These loans can be used for
buy-outs, foreclosures, cash out and construction purposes. Types of
properties are income producing property, commercial, apartments,
hotel/motel, office buildings, office complexes, golf courses, and
almost all commercial businesses. This is the most common loan that
businesses choose to take out in order to expand their business to the
best of their ability.
A Credit Enhancement loan is one that many clients use to help get them
out of debt and on the right track to a good credit standing again.
These clients are generally considered to be high risk because of their
obvious lack of good credit standing, however on average most of these
clients work very hard to pay back these loans as their main goal is to
achieve good credit.
A Mezzanine Loan is a loan that is subordinate to a Primary Lender. It
involves debt, which is paid back at the time of sale or refinance with
an equity ownership piece given to the lender as a kicker or sweetener
such as real estate or homes. These are loans which lenders typically
categorize as a 2nd-lien versus the preferred 1st-lien. This means that
the lender is not the first person to get paid back when the borrower
gets the money because the goal is to get out of debt with their
previous clients, so the hard money lender may be paid last. This is a
risk that the lender is willing to take as long as the client has the
proper collateral.
With these 3 main types of hard money lending, the hard money lending
business will continue to grow in the many years to come. There will
always be someone in need of anyone of these loans. |