Hard Money Second Loans for Business Purposes

Tapping Your Equity for Business Growth

For many people who own property with existing loans at excellent terms it can be difficult to tap the remaining equity, this is where a hard second loan can help. Loan guidelines have changed, as have rates, and the ability to obtain cash out on a new first loan at similar or more advantageous terms. Additionally, many institutions are limiting their second position lending programs, making it difficult at best to obtain a second or line of credit for the equity in an existing property. In situations like these we are able to help with California hard money seconds for business purposes.

 

Obtaining Second Position Loans

Obtaining lines of credit or second position loans on property comes down to a few basic factors:

  • The first factor is CLTV, or cumulative loan to value. This is the ratio of existing debt plus the proposed debt to the value of the property. On our hard money second loans we are typically able to help up to a maximum CLTV of 50%. For example, on a property worth $1,000,000 that has an existing loan of $400,000, we could potentially help with a hard money second of up to $100,000 ($1,000,000 value x 50% = $500,000 maximum total debt.

 

  • Another factor that we take into consideration is the use of funds. We are not able to help with consumer purpose hard money second deeds of trust. We are only able to help with hard money seconds where the use of funds is for business purpose. For example, a business looking to expand, acquire new offices, increase inventory, start a new advertising campaign, etc. For real estate investors it could also mean obtaining funds for purchasing additional rental properties, putting a down payment on additional investment property or improving existing investment properties. It could also be used to purchase a legitimate business, as well as a number of other business purpose uses.

The use of funds dictates the purpose of the hard money loan. We can even potentially make hard money second loans on owner occupied homes, but the use of funds must be documented and we must be able to confirm the business use of those funds. We can make these hard money second loans to individuals, LLC’s, corporations or other legal entities. We cannot help with a hard money second loan for consumer purposes. For example, we do not make these loans to pay off consumer debt, purchase vehicles for personal use, send children to college, etc.

If you would like to see how easy it is to apply for a hard money second loan, please give us a call at 707-315-1119 or fill out either our Borrower Form or Contact Us form and one of trained hard money specialists will be in touch promptly to answer your questions. California Private Money Lenders is the company to call for loans in Northern California and especially the 9 Bay Area counties.

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Hard Money Loans vs Bridge Loans

What Are Bridge and Hard Money Loans?

 

A hard money loan is an alternative to a conventional loan where private funding is secured by the value of a property. Therefore, it can be obtained relatively quickly.

Bridge loans are temporary loans that are used for the purchase or renovation of real estate property. They can be used as a down payment for the purchase of a new home when a person has not sold their own house yet. Bridge loans can also be used to acquire and renovate investment property, like a foreclosed home, when traditional lenders refuse to provide money for such a risky endeavor. This type of loan is usually paid back quickly.

 

Quick Hard Money Loans vs Bridge Loans: Major Differences and Similarities

 

Similarities:

Bridge loans secured by property are hard money loans, and hard money loans are considered to be short-term bridge loans, so the two are quite similar. If a bridge loan is being secured by property, than neither loan requires a high credit score. Both loans are considered to be short-term, or temporary, which can be beneficial to borrowers not interested in investing in a long-term repayment plan. Another benefit in acquiring a bridge or hard money loan is the flexibility in repayment options. For hard money loans, private lenders are willing to structure repayment and property release terms in ways that are mutually beneficial to both borrower and lender. For bridge loans, borrowers can choose to repay the bridge loan before the permanent financing is secure or after. The drawback of the benefits means there is a higher interest rate for both compared to conventional loans.

 

Differences:

A bridge loan does not have to be a hard money loan, though, and the money usually comes from banks or lines of credit. A hard loan, on the other hand, is usually financed by private investors. A bridge loan is solely for buying property, but a hard loan can be used for a number of purposes. Hard loans can be acquired rather quickly because private investors tend to be less picky than banks or lines of credit. This is also why a hard loan can make a great bridge loan.

 

Though hard loans and bridge loans are very similar, as they are both short-term loans mostly used for buying property, they differ in who finances the loan. Give us a call at 707-315-1119 to speak with one of our Sonoma County hard money loan specialists or fill out our borrower form or contact form and one of our Sonoma County hard loan specialists will be in touch promptly.

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