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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   April 2004

Brokering Hard Money Commercial Loans: As Easy as 1-2-3

Brokering hard money commercial loans is as easy as 1-2-3.  All you have to do is submit your name and phone number to the funding source, along with your client's personal financial statement, appraisal, and real estate set-up.  If the deal looks interesting, the lender may request additional information, such as pictures or environ-mental studies.  Then, you're on your way to brokering a hard money deal, and you simply wait for an answer.  What could be easier?

The reason hard money commercial deals are so easy is that there are many different types of deals and many ways of structuring them, as long as real estate is part of the collateral package.  There are entertainment deals, self-storage deals, new business deals, working capital deals, expansion deals, and the list goes on. In addition to the various types, there are many different ways and reasons to do them.

Exactly what are hard money deals?  They are deals that are based on commercial real estate owned by the business that is seeking a loan.  They generally range from $100,000 to $25 million or more. Some lenders are willing to advance a business 60 to 70% of the value of the property, based on the evaluation they make.

There are several advantages to hard money deals. First, they are extremely fast.  Businesses can often get the money they need in as little as 10 days.  The other outstanding advantage is their flexibility.  Hard money deals represent the best of thinking "outside the box".  

One example of how fast and flexible hard money deals can be is the following. A businessman who owned a building in Queens was looking for funding.  One of the principals from the firm that was considering lending the company money simply drove by the building and, by viewing it from the outside, was able to evaluate its worth at about $250,000.  The value of the businessman's real estate quickly turned into a successful deal.  In another example, a steel fabricator who owned a 122,000 square foot warehouse in upstate New York qualified for a loan of $1.25 million, an average of $10 per square foot, based on the value of his real estate. 

One more example demonstrates how a creative approach can be applied to making hard money deals. The owner of a self-storage building on eastern Long Island who wanted to build more storage space needed a $400,000 loan to add on an additional 20,000 square feet.  He owned a piece of land in the Hamptons that was evaluated at $600,000 to $800,000.  He got the $400,000 he needed.  And the entire process took less than 10 days!

Finally, an industrial developer from New York wanted to build an indoor shopping mall in an existing building in Pennsylvania. Using the building as collateral, he was able to borrow $2 million as a construction loan.  The project was successfully completed.

Countless other examples illustrate the many different ways of structuring loans.  Hard money loans also give the borrower the time and flexibility to seek a more conventional mortgage when his/her finances improve after the first year.  All these deals demonstrate how thinking outside the box can result in a successful deal and that hard money deals are as easy as 1-2-3.  All it takes is a little creativity - and the determination to get the deal done!  


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