Anytime someone borrows money, there are some advantages and drawbacks. When obtaining money from a private lender, there are no set lending requirements, allowing the two parties to come to their own agreement. Private funding can also be secured extremely quickly since the loan qualification process is often less complicated and time-consuming. You can expect to spend less money on fees and closing costs connected with the loan as opposed to getting a loan with a bank.
A private money lender is a non-institutional person or company that loans money, generally secured by a note and deed of trust, to fund a real estate transaction. Private money lenders are considered more relationship-based than hard money lenders.
If you are doing a rehab flip, buying a property, renovating and repairing, and selling to another investor, hard money lenders are sometimes best. These loans are convenient if you need extra money to purchase and do rehab work for a short period, perhaps only a few weeks to a month or so. At the closing, if or when you sell the property, you would then pay off the loan and keep the remainder of the proceeds as your profit.
The application process is also much quicker with private lenders. You can be approved and receive the funds for a private loan in days rather than weeks or months as with a bank loan.
Private lenders also offer term loans to established businesses that can demonstrate the ability to make payments from their revenue. These rates and fees are often higher than loans from banks.
There are many private business lending companies online to choose from within the business loan marketplace. You can find dozens of lending firms to choose from, depending on your requirements. For example, some specialize in short-term loans, others in niche markets such as franchises, etc.
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