Businesses turn to commercial loans when they need to expand as well as when times are slow such as in non-peak seasons. There are several lending options available to those entrepreneurs that have decided to go out on their own and sink or swim.
Small Business Administration (SBA) loans are often the first choice for businesses. This is due to their low interest rates and longer terms of payment, usually 7 to 10 years. They will want to know what you plan on spending the money on be it inventory, working capital, newer equipment or a business acquisition. SBA commercial loans do, however, have very stringent underwriting standards and are not available to everyone. You will need to have excellent credit and been in business for two years.
Unfortunately, it is not just SBA loans that require you to be in business in order to get a loan, a catch-22 for start-ups. Most lenders look to your cash flow in order to qualify you. After all, it is this cash flow that will ultimately repay them. If you are just joining the ranks of the self-employed, you will need to look for alternative commercial loan lenders outside of banks, credit unions and the Small Business Administration. The growing crowdfunding campaigns are one way new businesses are finding capital. For small businesses that are looking for short-term loans less than $35,000, a micro lender may be an option. These are non-profit organizations that will require a business plan as well as financial statements. Another alternative is a private hard money lender.
Hard money loans generally come from private investors or small groups. They are always secured by a “Hard” asset—hence the name. You can use your business’s equipment or real estate as collateral. If your business does not have enough equity or collateral in it, you can opt to use your home or another asset. Of course, should your business go south, your asset will follow, so be sure to understand the ramifications and know that you can live with that decision. Some lenders make loans on future earnings and receive payment based on a percentage of credit card purchases. These types of lenders often go under the name of merchant cash advance companies.
Private Hard Money Loans
Keep these facts in mind when considering obtaining a commercial loan from a private hard money lender.
· Know what you are using as collateral and what it is valued at.
· Have a solid business plan.
· Know the lenders loan-to-value ratio and obtain the needed funds. Many private hard money lenders come in at around 70 percent LTV.
Private hard money lenders value the collateral more than your credit score.
At Level 4 Funding, we work with several private hard money investors who are interested in lending to small businesses. Call us for a no-obligation quote and to see if we have the investor that you’ve been looking for.
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: 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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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