Starting a real estate business can be one of the most exhilarating yet challenging experiences of your life. In the U.S., small businesses account for 99.5% of all registered companies, yet most die off by the fifth year of operation. One of the leading factors of the shutdowns is access to capital. Given that approximately 68 million Americans have a bad credit rating, access to loans from traditional financiers may be next to impossible.
Private lending provides quicker access to cash, even with a bad credit score. Here are seven benefits of working with a private lender for your real estate deals.
Quick Approvals
Traditional banking systems utilize invasive and cumbersome documentation processes that delay the issuing of loans. Private lending offers a quicker alternative, with most loans getting approved between three to seven business days. Some hard money lenders may provide same-day approvals for your projects. You would be lucky to find access to a traditional mortgage loan in less than 45 days.
Your Credit Score Does Not Matter As Much
Bad credit history drags along with you wherever you go. Banks with stringent loan approval processes may not process loans for business owners with a low credit rating. Your fix and flip business is therefore in danger with less access to capital. Private lenders make real estate loans based on the value of the property-not your credit rating.
Ready Cash Flow
Real estate deals are a tricky business, especially without ready cash to cut into a sweet deal. A quick source of funds means that you can close your deals effectively and continue growing your business. The red tape in banking halls for issuance of real estate loans makes private lending a preferable option.
Less Paperwork
Traditional financial systems tend to utilize what seems like a ‘one-shoe-fits-all’ approach for loan approvals. The real estate industry is a dynamic world with a rapidly evolving ecosystem. No two flipping deals are identical. By choosing private lending, you avoid being buried in endless paperwork with fewer assurances for loan approval.
Higher Approval Rates
Private lenders are less risk-averse and tend to invest in projects that the banks would not typically consider. With a less bureaucratic process, you are assured of faster access to ready cash to throw into your business. Besides, the interest rates are competitive with a more straightforward approach to fund your deal.
Flexibility
Hard money lenders offer flexible repayment options to their clients. The private lending may span from short term lines of credit of about 2-3 months to long term deals of over three years. You may choose your preferred option with greater control over how you use the funds.
No Penalties For Prepayment
Traditional banks peg punitive charges on their financial products for early repayment of the loans before the due date. Private lenders will not charge you for the prepayment of your construction loan to recover the lost interest. You may not suffer penalties for loan repayment.
In Conclusion
Starting a real estate business may be a lot of work. However, private lending can solve your cash flow problems and provide stability necessary for the start-up to stand on its feet. Are you looking for funds to finance your next flip in Atlanta? Hard Money loans are the solution you have been searching for.