There are many industries out there that rely on getting money quickly to operate. The best example of this has to be the real estate industry. Thousands of Americans make their living by buying up properties, either commercial or residential, and then selling or leasing those properties for a profit. People will buy up houses, fix them up, and put them on the market, or they’ll buy commercial real estate at a discount, wait for the area the property is in to develop, and then lease out the property for a sizable profit. In both of these instances, the person or company doing the buying needs to get their hands on sizable amounts of money in the short-term to be able to make the purchase.
Sometimes such borrowers will turn to banks, but in many instances they’ll make the decision to turn to a hard money lender. A hard money lender is a private entity, usually a company, that lends money to other private entities on the short-term. The vast majority of hard money lenders will put a higher interest rate on their loan and a shorter time period for the loan to be paid back, but since the loan is paid back quickly the interest paid often ends up being smaller than the interest paid on a bank loan. Even if the bank loan’s interest is lower, the fact that the loan is dragged out over a long period of time means that the borrower ends up paying more interest in the end.
Hard money lending is great for people who need to get their hands on money quickly, such as the real estate professionals detailed above. When a real estate person is looking to buy a house, they need to get the cash on hand to make the purchase. Since they know that they’re going to sell the house quickly and turn a profit, they often turn to a hard money lender who can get them the money they need quickly. They know there’s a higher interest rate, but since they’re going to be paying back the loan as soon as the house sells, the total interest paid isn’t high enough to deter them from taking the loan. On the lender side, a hard money lender just wants to make sure that the person has some skin in the game and that they have enough assets to pay back the loan should something happen. They like to lend to borrowers who are also putting some of their own money into the transaction, because that way they know they’re working with a motivated buyer who wants to sell the house as badly as the lender wants to get their money back. They also will only lend to borrowers with a sizable number of assets as collateral.
Working with hard money lenders like Montegra Capital Resources makes a lot of sense for the myriad number of borrowers out there who rely on being able to get capital quickly to make their living.