Volume 2 Issue 1 January, 2011

Here is your issue of BM$ Success Newsletter – the companion newsletter to the www.business-money-source.com website.

This Month’s Featured Business Financial Product:

Hard Money Loans have long been the standard financing for real estate investors and businesspersons to acquire quick short term project funding. Even though this type of financing is expensive in terms of interest rates when compared to conventional financing, the terms and speed of the transaction made it viable for quick turnaround situations such as “flipping” properties or purchasing raw materials.

There have been two important changes to the accessibility of hard money loans since the economic crash of 2008. One change is the tightening of credit restrictions by all kinds of lenders, on the borrower. In the past some real estate investors who were seeking hard money would often have had a recent bankruptcy or had received a Notice of Default and were still able to acquire the necessary financing. If this is your situation now, the prospect of acquiring the financing is considerably less.

The other change is a reduction in loan-to-value (LTV). Many lenders were comfortable with LTV in the 70 –75% range and going to 80% on especially lucrative deals. Most lenders have gone back to a more conservative 60 – 65% LTV.

You must be aware of the changes in the market and the increased caution with which lenders will proceed in the foreseeable future. You must present a well thought out and well written loan proposal along with a financial statement and monetary commitment that shows you are a serious businessperson. Forget about asking for 100% financing unless the lender is a very close and beloved relative!

This Month’s Business Survival Tip:

A bridge loan is a temporary alternative financing tool that can be applied to many business situations successfully.

Bridge loans offer means for short-term financing while permanent financing is being sought or to carry a property while it is in the process of being sold. These loans are used most often in commercial real estate but can also be used in other businesses and residential home developers and investors. Bridge loans usually have a relatively high interest rate when compared to other types of financing. The increase risk to the lender of these hard money loans warrants much higher interest rates and other additional costs.

The interest rate will be in line with interest rates for all hard money loans, in the 12 to 15% range. Loan-to-value (LTV) will rarely go higher than 65% for commercial property or 80% for residential properties.

For more on Bridge loans and other types of alternative business money, go to our website: https://www.business-money-source.com.

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SBI!