Asset-based, hard money loans are made by private money lenders which are non-institutional (non-bank) capital sources, generally secured by a note and deed of trust, for the purpose of funding a real estate transaction.
They use a very strict set of rules regarding the collateral status of the physical assets being used to obtain a loan.
What is Hard Money Used For:
This type of financing is used for high risk business transactions that traditional banks or institutions will not lend on.
For example; Chapter 11 Bankruptcy, commercial property that is vacant or needs rehabilitation and other types of high risk business ventures, turnaround situations, short-term bridge financing and for investors who want to purchase properties to fix and flip.
Types of Collateral Used:
Asset based lending comprises business or a real estate loan secured by the liquidation value of their assets, generally at quick fire sale values.
A recipient receives this form of financing by offering real estate, inventory, accounts receivable and/or other balance-sheet assets as collateral.
Common assets that are provided as collateral for a hard money loan include physical assets like real estate, such as land and physical properties, company inventory and manufacturing equipment, or physical commodities.
If the borrower fails to repay the loan or defaults, the hard money lender can seize the collateral and sell the assets in order to recoup its loan amount.
In many cases the collateral to secure the loan is two times the value of the loan; hence the hard money lender will make a substantial profit even if the loan defaults.
Due Diligence and Underwriting:
Prior to authorizing a loan, lenders require a relatively lengthy due diligence process, which includes the inspection of the real estate, balance sheet, ledgers and assets to calculate the value of a company's allowable borrowing capacity.
Costs associated with this analysis vary, but common charges include site visits, collateral evaluations and interest costs.
Hard Money Lending Source:
The objective at Winston Rowe & Associates is to add value to a client's commercial real estate acquisition or refinance by offering a wide range of hard money, asset based financing solutions for; apartment buildings, hotels, shopping centers, office buildings, industrial property, raw land, medical offices, manufactured home developments and construction projects.
They can be contacted at 248-246-2243 or visit them on line at http://www.winstonrowe.com