Private lenders that is. Why they are important, when to use one and who they are:
Private lenders are important because they provide a source of capital to investors or homeowners when they would not other wise be able to access funds. This saves people from foreclosure, allows business owners access to important working capital or the ability to purchase the property they wanted.
Timing is everything, and when it comes to using private lenders, it may come down to the fact that you do not qualify for a loan by any other means. It could also mean that you may need the loan very quickly and do not have the time to go through a long drawn out bank process.
These lenders go by many names, some of the most common or at least the ones that I can print here are like the lenders of last resort, bridge lenders, hard money lenders or angel investors. They can be your cousin Roger, your Uncle Carl or Basil your friend from High School. However most often they are seasoned business owners with access to cash to lend.
Just because they have money does not mean they will lend out on any project. They desire a set rate of return and always have a risk tolerance that they are willing to follow. Once you meet their guidelines, you will find that they fund very quickly and allow you to repair your credit, fund your project or purchase the property you wanted. Last but not least, remember they are not long term lenders, plan on being with them no longer than 12-18 months. Every successful application will have an early exit strategy. They want to know how they are going to be paid out so they can fund the next project.
If you have a project that would benefit from a loan from a private lender, please feel free to contact my office. Remember the interest rates will be inline with the risk to the lender, and that means currently 12% (vs 4-6% for bank money) or more, and expect to pay a lender’s fee on top of that of up to 10% ( or up to 6% for insured bank loans).