Hard money lending is attractive on the surface, but you need to consider a multitude of factors to make a decision on your business funding efforts. Hard money, is likely not an option.
If you are looking for business funding for your company, you probably considered hard money due to its benefits that are realized on the surface of the transaction. Meaning, there is no actual benefit the hard money if you consider the totality of circumstances. That is, overall, hard money is always a bad idea (save for a very, very few limited time-sensitive circumstances). Here are a few reasons why hard money is a bad idea and an alternative to this that idea.
You’re already uphill.
First of all, if you begin to enter a transaction with a hard money broker, you’re already uphill. Meeting, if you’re in front of them he knows you suffer from some kind of deficiency, whether that be credit, income, business history, etc. the hard money broker is already prepared to take advantage of you. The question here is, why would you allow this to happen when you can avoid it?
More aggressive than banks.
Hard money lenders are absolutely less forgiving than even the big banks (despite the fact that many people feel big banks or horrid). Hard money lenders do not get to play with Monopoly money like big banks (thanks to the Federal Reserve), so when they are owed money they’re going to be way more aggressive in collecting it. Even if there were some kind of mistake, hard money lenders will be quick to accelerate the note and foreclose it without regard for circumstances that warrant their consideration.
Most hard money contracts fall under the concept of unconscionable dealings. This simply means that the agreements are extremely one-sided and benefit the hard money lender. While I’m directly stating that these contracts are unfair, given the nature of hard money lending I don’t blame the hard money lender. However, this does not mean you should engage in hard money. It means you should avoid it.
Why consider it?
The reason people consider hard money loans for business funding in the first place is that they feel-or actually are-unqualified for conventional business funding or other alternatives more desirable than hard money loans. In the case that some of his unqualified, it simply makes no sense to consider the hard money loan. If this is the case, rather than considering the hard money loan you should consider fixing your credit or seeking the counsel of a credit expert to determine whether or not there are ways to avoid hard money. In almost every case we have seen, there are ways to avoid hard money loans.
Alternatives to Hard Money.
If, for some reason, you feel you are unqualified for typical or conventional business funding methods, hard money is certainly an option. However, and as discussed above, it’s a bad option. An alternative to hard money is an unsecured business line of credit. In fact, an unsecured business line of credit (in some cases) is preferable to a conventional business loan. If you’re interested in finding out more about an unsecured business line of credit, please contact us.