The soft hard money loans of today are those loans usually funded at higher interest rates (11% to 16%) with more total points (4 to 10) or shorter terms (12mo to 60mo) with commitment fees ranging from $1,000 to $5,000 in exchange for the ease of obtaining a faster cash type no-red-tape loan. These loans usually end up to be the loan of last resort after the borrower has exhausted all other “traditional” sources and wasted 3 to 6 months of his time.

Hard money loans have one central theme. There has to be clean cut, hands down equity in the property or project to give the lender a buffer factor to invest his or her funds. This equity must be through appreciation in the property over several years, or a big cash infusion used to improve the property and it’s earning potential at some earlier date. Most hard money lenders will go up to 50% to 70% of today’s value of subject property.

Soft hard money loans are made on commercial properties, residential properties, and raw land.  Residential homes are more difficult due to homestead and bankruptcy protection and foreclosure laws in most states. Residential also falls under RESPA and truth in lending laws requiring a lender to be licensed and have a branch office in the state where the home is located, commercial does not. Raw land is done with loan to value ratios of 50% to 60% of the land’s appraised value.

Most borrowers or loan brokers think of soft hard money loans being made to folks with bad credit. Although some do fit this mold, most hard money loans are made to borrowers with average to good credit. So, why use soft hard money?

The subject property to be purchased might be presently vacant or under 50% leased out. It may have fallen victim to poor demographics in a changing neighborhood over the years. Most traditional lenders want property in strong areas and less than 10-15 years old. The property might have deferred maintenance or in need of renovations to obtain a better value “once” improved. A lot of lenders just don’t want to fool around with a loan that just doesn’t already fit the guidelines, and will move on to the next deal.

Hard Money Commercial Loans From $1 Million $10 Million

Hard money loans are short-term bridge and gap financing for distressed
and time critical transactions.  Hard money loans are available on entitled
and unentitled land, residential and commercial land developments,  for
rehabs projects on income producing commercial property, partner buyouts  
and on luxury residential properties.

Our lenders can be fund an economically sound project  very quickly---
sometimes in fewer than 10 days.

The value of the property is the primary qualification.   Hard money loans are
available on projects where the investor has significant equity in the collateral
regardless of stated income, bad credit or past bankruptcy .   Hard money
loans can be used to reinstate foreclosures and defaults.

Loan-to-value is between 50-65% of the "quick sale" value of the property and
may be higher on income producing properties ready for rehab.  These loans
are available from $500,000 on residential property and $1 million to $20
million or more on commercial projects.  Rates and terms are designed to
compensate for the lender's risk but may be as low as 10% with two points.

Hard money loans are more expensive than a bank loan, yet less expensive
than an equity partner. Hard money loans typically do not require income
documentation and may be available for all types of borrowing entities .

Hard Money Do's And Don'ts

 Don't send an enormous pile of disorganized papers. Prepare the short deal synopsis, called the executive summary, which addresses the project and the loan requirements. Imagine a neat 2-page submission as compared to a 40-page disorganized pile of papers.

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Do describe the transaction: type of real estate project or business loan; location of real estate; type of loan; loan amount; equity available and source; term of loan; exit strategy; amount and types of debt that exist on the property; payoff situation; description of the property.

Don't ignore or try to hide the "hair" on the deal. This will come out during the due diligence process, and can negatively impact your financing by casting a negative shadow over you and your project. If there is "hair" on the deal, a brief overview of the "story" or the events leading up to the story should be included.

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Don't tell the story of your life and the projects entire life at the onset.  Rather, start with the conclusion (project, loan amount, purpose and term) and then support the conclusion with the supplemental information you will provide. The details of the "story" will probably come out during a telephone conversation at a later date.

Don't expect to receive any serious funding considerations unless you have a well though out exit strategy in place. You should identify the exit plan in your initial submission, and be prepared to defend the strategy. Two exit plans are better than one. Lenders are interested in being repaid, not in repossessing your real estate or business.

Do provide 2 to 3 year's profit and loss statement showing net operating income, as well as this year's year-to-date profit and loss statement.

Don't include mortgage interest and depreciation in the financial or P&L statements. Net operating income (NOI), before depreciation and debt service is what the lender will want to see.

Do show actual vacancy information clearly, as well as management fees, reserves for replacement, etc in the budgets

Consider having your loan professionally prepared and underwritten. You only get one chance to make a first impression.
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Apply For A Hard Money Commercial Loan