Hard money is the answer itself. Plain hard cash, that comes with a price. Higher interest, points, business control and pressure. Hard money is often the first and last resort to those whom traditional financing is not an option. IE: Bad credit with no where to turn.
Loan to value is lower as well. Perhaps 50% of loan value. That means you want 500,000 you better have 1,000,000 to back it up, or what you want the money for is worth that and more. This does not mean, forcasted values. Also make sure you have a clean and clear exit plan. Now the blood factor. If something happens they want you to feel the same, and more, pain they feel.
Also control. You will give up a portion of your business to them. This can also mean they are given a seat on the board of directors. These are people who use their money to work for them. They want and get higher returns in shorter time frames than they would elsewhere. Kinda like a loan shark. Only the loan shark will not ask for balance, income and cash flow statements.
Hard money will not take raw land and build a business without other real property worth more than you build. That goes back to forcasted values. It is another way for people with money to find a great deal. Like the 8 million dollar house for 250,000 dollars. They can sell for 10 million. It takes money to make money and they have the money making the money.
I am not a lender a broker, just someone else looking to go into business with no money. I have learned what I have written about by looking deeply into obtaining hard money. They are simply asset based lenders. They may or may not check your credit. Full, limited or partial documenation. You may even have to wine and dine them. Pay for them to come to you to see the deal first hand. All kinds of what evers.
It is truly an option if you have lousy credit or a deal no bank will touch. I just have not figured out how to obtain one. Also they will not loan operating cash, although they say they will. That is unless what they loan is 20% of the entire value and they hold the keys to the house. I would like to borrow a 1/4 mil to buy an up and running business, franchise property and all. But I realize to me the hard money is how hard it will be for me to come up with. Do I own enough stuff to sell to raise the money? I do not know.
Dec 11, 2008