While there are dozens of guides available for securing traditional loans from banks, you might discover that it’s challenging to find actionable information about getting hard money loans approved.
It’s true that private money lenders require less information and have fewer strict guidelines for application and approval, but there are still valuable tips to learn about presenting your hard money loan request.
Your private money lender wants to build a relationship with you so that you both benefit from current and future projects. To begin this relationship, you need to show that you value their time and your customer’s time for efficiency, from start to finish. How can you show this? Be organized, thorough, and transparent.
We’ll take you through whether a private money loan is right for your customer and what you will need to guide them through the process. We also will provide tips on presenting your loan scenario to the lender and appropriate ways to follow up with them for more approvals.
What is a hard money loan? And, when to use private financing.
Hard money loans are acquired from an individual or company, not a bank.
They are approved much more quickly because the terms are negotiated between the lender and the borrower. They’re not based primarily on an excellent credit score or other strict requirements, such as with a traditional institution. Instead they’re approved based on common sense and the value of the deal.
The quick turnaround and common-sense approach make these types of loans ideal for many types of borrowers, including:
- Real estate investors
- House flippers
- Multifamily properties
- Investment properties
- Bridge loans and new construction loans
- Business owners
- Self-employed borrowers
- Those with large amounts of home equity
What do these borrowers have in common? They often have more complicated scenarios that don’t qualify them for bank loans. They usually need money fast, and need large amounts for investments. They can’t afford to have delays in their projects. And, their situations sometimes have not allowed them access to the tax records or proof of good credit required by traditional institutions.
As a broker, it helps to know the ins and outs of your customer’s situation in order to properly present their scenario to a hard money lender and give them the greatest chance of success.
Know your hard money loan file. This starts with good documentation and organization.
Good documentation and organization is important throughout all of life, and a hard money loan request is no exception. A broker must deeply understand both the lender’s and customer’s needs in order to accurately put together a loan file.
Developing a relationship with a private money lender before you begin sending deals their way is a good method to get things started. Learn the needs of the lender, including the information they require, how they like to receive it, and how they prefer to communicate.
When it’s time to send customer requests, you will have already established a basis of trust and knowledge with the lender. This benefits your customer as well, because you know exactly what you need from them for their deal to be successful.
Presenting your hard money loan scenario and appropriate follow-up
Hard money lenders won’t have many questions for you about the borrower’s situation. They simply want to know the subject property address and a short submission story.
Since you’ve already been in contact with both parties and have established relationships, you’ll know exactly what information you need to share.
Not all hard money lenders are going to be upfront with you, but the agents at Marquee Funding Group see that it’s their jobs to be as efficient and clear as possible. Marquee Funding Group is the ethical standard of the hard money loan industry.
Do your part by staying transparent and straightforward about all aspects of the deal. While hard money lenders don’t have a long, strict list of requirements, the information they do require is valuable to the deal.
Private money lenders may want to look at credit score, too, but they won’t hold it against a borrower as the bank might. They will, however, want to know the borrower’s situation, plan, and exit strategy in the form of an executive summary.
You’ll most likely accompany this summary with photos and the required documentation, usually sent to the lender via email. Make sure everything is labeled clearly and concisely, and all related emails are named appropriately to keep them together.
Call the lender an hour or two after submitting everything to make sure they received what they needed to. This also shows them that you care about the deal and will stay on top of things, making this an efficient and beneficial partnership.
Writing the executive summary for your hard money loan request
The executive summary is your straightforward, clear summary of the project that includes your borrower’s plan and exit strategy. It will include the requested loan amount and project timeline. It should be short but filled with all relevant details.
This will be included in your email to the lender, and will be referenced by both of you often. You also will need to complete a loan application, such as this one from Marquee Funding Group.
Working with Marquee Funding Group
Marquee aims to simplify the types of deals that present challenges to traditional institutional lenders. We understand the urgency brokers face to get your customer’s deal done. We close on deals in as little as seven days, and provide same-day approvals.
We do this by looking at your customer’s unique situation and making quick, common-sense decisions based on the information you provide.
Building relationships with our brokers is very important to us. Our goal is to provide a respectful experience that focuses on everyone’s best interests. Building relationships means more confidence and a smoother experience from all sides. We want to do long-term business with you.
- Owner-occupied or non-owner-occupied consumer or business purpose loans
- Common-sense underwriting
- Loan amounts from $50,000 to $20 million
- Single-family, multi-family, commercial, industrial, construction, and land loans
- Purchase money, rate-and-term refinance, and cash-out refinance options
- Loan-to-Value up to 70% (deal specific)