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Tuesday, September 24, 2019

Top 5 Reasons People are Denied Arizona Business Loans

Roughly 77% can’t get Arizona Business Loans and lines of credit at all or in meaningful amounts. If one or more of them is holding you back too, you still have financing options.

The Small Business Credit Survey is an annual publication produced by the 12 Federal Reserve Banks. The latest version indicates that of those who apply, 23% don’t get any kind of financing and 54% don’t get the amount of cash they need. These shortfalls can effectively shut down a company or stunt its growth. Oftentimes, banks cite one or more of five main reasons for denials.

1) Insufficient Credit History: The greatest cause for financing shortfalls for small businesses is not having established credit. This impacts 36% of those who apply.

2) Insufficient Collateral: When credit isn’t enough to obtain financing, sometimes people can use assets as collateral. However, 35% of shortfalls in financing are impacted by lack of assets.

3) Too Much Debt: The survey found that 30% of businesses don’t get the funding they need because the bank thinks they have too much debt to be able to make good on additional payments toward Arizona Business Loans.

4) Low Credit Score: In all 27% don’t have a good enough credit score to qualify for the loan they need. The numbers skyrocket if the lender considers you to be medium risk or high risk, with just 29% and 10% being fully funded, respectively. To clarify, you would have to have a minimum business credit score of 80-100 or a personal credit score greater than 720 to NOT fit into one of those categories.

5) Weak Business Performance: The last measurable segment includes those who are operating underperforming businesses, which could very well be weak because they lack capital. Even still, this ranks among the reasons for not being offered cash 22% of the time.

Arizona Hard Money Lenders Can Lend a Helping Hand When Banks Don’t

Given that lack of collateral only impacts 35% of small Arizona Business Loans, the approval rate could theoretically be as high as 65%, yet just 23% are getting all the funding they need. This means it’s not lack of collateral holding business owners back, but issues like credit, debt, and business performance. Yet, everybody knows it takes money to make money. The simple answer to getting around most denials: hard money.

If you’ve got collateral, you can get your company the capital it needs to be successful.

Arizona Hard Money Lenders are different because they care more about the value of the collateral than they do about all the other common factors that result in denials. In other words, it’s easier to get Arizona Business Loans this way and a greater number of people will qualify for them—including those who have already been denied by banks. The terms are a little different too. Instead of taking out funds for an extended period of time and paying on the interest and principal each month, you’ll likely have the funds for a year or two, making interest-only payments for the duration and paying off the principal in the end. If you think a hard money loan is right for you, talk to a broker to find out what kind of terms you qualify for.

Dennis Dahlber Broker Ri CEO Level 4 Funding LLC

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
© 2019 Level 4 Funding LLC. All Rights Reserved.

Tuesday, September 17, 2019

ALL ABOUT RENOVATION LOANS

You have heard about fix and flips—buy a house, renovate it and sell it for a profit. The first step is find a property—the next step is financing.

You find a property at a great price in a good location and you just know you can get it in tip-top shape and make a killing on a sale. There is only one problem—you need financing. You’ve heard that hard money lenders are typically where investors get their financing. But, you haven’t ever done this before and need a quick rundown of the process. This article will walk you through the steps of getting financed for a fix and flip project.

All hard money lenders are different and have unique requirements for financing renovation loans. Certain lenders loan on a percentage based on appraised value and there are others tend to loan on a percentage based on the purchase price of the property. When you meet with your chosen lender they will give you a complete breakdown of their fees and terms—this will include interest amount, loan points and all closing costs. Closing costs will include all document fees, notary fees and escrow fees. The lender will explain clearly what that means to you and your financial obligation.

There are 7 basic steps of the hard money lending:

1. Get pre-qualified—This consists of finding out the requirements of the lender and applying for the loan. The application process is simple and straightforward. It typically takes about 15 minutes to become pre-qualified.

2. Search for a property that has a price you can afford and is in a good location and get it under contract.

3. Contact you lender and give them: the contract price, estimated cost of repairs and give them an idea what you believe the after repair value will be.

4. Your lender will typically send their appraiser out to the property, but occasionally they will give you a list of approved appraiser and you then are5 responsible to get the assessment done and to the lender.

5. The lender will ask for any documents that need to be verified. It is your responsibility to get the documents to your lender quickly.

6. At this step your terms and rates will be agreed upon with your lender.

7. You close your loan and buy your property

Renovation loans typically include any rehab costs, as well.

When you receive your loan based on ARV you will have more money than the purchase price. This is how it works. If you’re lending 70% ARV and the purchase price is $95,000—and your ARV is $155,000 you will receive $108,500 funding. Hard money lenders will lend more for renovations on a job by job situation.

HARD MONEY BUSINESS LOANS

Hard money loans can be used for various purchases. Typically, they are used for real estate investments such as a fix and flip home. However, hard money lenders will also approve business loans.

Hard money is money that is supplied by private lenders versus banks or credit unions. It is called hard money because typically it is secured by an asset, such as property. Many people don’t know that hard money lenders will lend to borrowers seeking out a start up business loan. These loans work a little different that a typical hard money loan.

There are different types of hard money lenders. They are all either people or companies that has enough money to lend. Some lenders only work with a few people at a time where others lend money to thousands of people at a time. And, there are some lenders who will loan money to a start up business. Some secure the loan with the business owner’s property. This type of lender will only loan to a borrower who has an asset that can be repossessed in the event of non-payment. Then, there are merchant cash advance lenders,

Most hard money lenders are merchant cash advance lenders. These lenders will lend to small businesses, whether they be start-ups or an existing business that is expanding, in exchange for part of the businesses future earnings. Typically, these lenders will deduct a percentage of the credit card transactions. Once the loan is paid off the lender will have no more rights to the earnings of the business. However, each lender may handle the loan differently.

There are multiple advantages of a hard money business loan. Hard money lenders will lend to businesses that don’t have much collateral or income. They also don’t typically require the borrower to provide them with a sales history. And, approval happens quickly. These loans are generally approved within 48 hours. This is a fast and easy way to get a business up and running.

Gaining approval for a business loan is not easy; especially if you have any dings on your credit report or have had to go through foreclosure or bankruptcy.

A hard money business loan can help many small business owners. However, it is imperative the applicant thoroughly check out any companies or individuals that they are considering borrowing money from. It is helpful to set up an appointment and meet with them. Borrowers should get detailed information that will provide the interest rate and payment plan. Also, potential borrowers ought to ask the lender about their experience with hard money business loans.

RENOVATION LOANS

Renovation loans, also known as rehab loans, help real estate investors both purchase and renovate properties. This is also known as a fix and flip loan.

A renovation loan is used by investors who need financing to purchase a distressed residential property and to completely renovate said property. A renovation loan will combine the purchase price with the rehab costs into a short-term, interest only loan. Depending on the investors credit-worthiness and income, they may qualify for various loans. Typically, investors seek out hard money loans due to their quick funding, interest-only and short terms.

Hard money renovation loans are offered by a variety of lenders; both small and local and large and national. Local lenders are able to work with unique projects and generally offer a wider range of rates and fees. They also are able to be more flexible with their qualifications and terms due to their hands on approach. Bigger national lenders typically have standardized costs and are not flexible with their qualifications and terms.

Terms of renovation loans vary. Generally, lenders will lend between 60% to 80% ARV (after repair value). The ARV is what the property will be valued at once it is rehabbed. For example: house A purchase price is $65,000. The investor, after all their homework, believes the property will sell for $110,000 after it has been renovated. The hard money lender will lend 75% ARV (that is 75% of $110,000). The loan will be in the amount of $82,500. Not all lenders require a down payment. However, borrowers should be prepared to put down anywhere from 15% to 25% ARV,

Borrowers will need to provide three months of personal bank statements, purchase contract, a list of any past projects and a renovation budget. Each lender is different and may require different qualifications. And, although hard money lenders aren’t overly concerned about a borrower’s credit score, they do like to see at least a 550. Borrowers can prequalify in as little as 10 minutes and can be funded within 10 days.

Interest rates, points and loan terms

As stated above, local, smaller lenders tend to be more flexible while national lenders stay more standardized. Typically, interest rates run from 7.5% to 13% with points ranging anywhere from one to ten. While these rates are higher than conventional mortgages, they reflect the higher risk that come with renovation loans. During the life of the loan the borrower will make interest only payments with a balloon payment at the end. This keeps the costs down for the investor while he is rehabbing the property. Loan terms are generally from 12 to 36 months; however, they can be from six months to five years depending on the unique situation of the borrower. Hard money loans are beneficial to any investor requiring a renovation loan.

HARD MONEY LOANS ARE A GOOD OPPORTUNITY FOR BORROWERS WITH BAD CREDIT

If you have damaged credit and want to get a home loan you have options available to you.

Traditional bank home loans are fully dependent upon the borrower’s credit-worthiness and income to qualify for the loan. Hard money lenders, on the other hand, take a different approach. These lenders base their lending decision on the value of the property. Hard money lenders are willing to take risks on people who have made financial mistakes in the past.

A hard money lender is a private individual or corporation that is not affiliated with a traditional lending institution-- such as a bank or credit union. Hard money lenders use the purchased property as collateral; meaning in the event the borrower defaults on their payment, the hard money lender takes back the property and resells it to another buyer. To the hard money lender, the value of the property is more important that your financial situation.

Hard money loans are terrific for borrowers with bad credit. This goes for borrowers with low credit scores, bankruptcies and foreclosures. Generally speaking, hard money loans have shorter terms-- three to five years at most. However, today there are lenders who will grant longer loan terms. Because these rates are higher than a conventional mortgage borrowers won’t want to stay in a hard money loan for a long period of time. They are perfect for borrowers that will be able to work on their credit and then transition into a traditional loan.

Why would borrowers with bad credit want to use these loans? Hard money loans have quick approval. Because the lender is concerned about the value in the property versus the financial situation of the borrower these loans are typically closed within a week. If a borrower continues to work with the same hard money lender, closing time can become even quicker. Because hard money lenders don’t have the same underwriting process as banks and look at each deal on an individual basis they can be more flexible. Borrowers are typically able to change the payment schedule and loan terms. These are individual lenders or small companies so there is room for them to be more flexible and negotiate. It is important that potential borrowers know they will most likely not be approved for 100% of the property value. In fact, most hard money lenders don’t lend more than 70% of the property value. A borrower must be prepared to put down 30%. Putting cash down protects the lender in case of a default. Lending to people with bad credit is a significant risk for lenders.

Hard money lenders give borrowers with bad credit an opportunity to buy property while helping raise their credit score.

Yes, borrowers will have a higher interest rate when taking out a hard money loan. However, if they want to own their home this is about the only way to get financed. The other choice is to continue throwing their money down the toilet on the first of each month while paying rent. Hard money lenders give people with damaged credit a chance to build their credit and own their home.

ALL ABOUT HARD MONEY SMALL BUSINESS LOANS

When it comes to small business loans there are a variety of different individuals and organizations that are willing to lend--one of those options is hard money.

It’s not that difficult to get a small business loan--if you have the qualifications and the credit. Into the picture steps hard money. Business owners with poor credit or a small amount of time in business have an opportunity for financing through hard money. These hard money loans are practical for business owners who don’t meet the strict qualifications of a traditional lender. What exactly is a hard money loan and how does it work?

Hard money small business loans are backed by the business's commercial real estate as collateral. It is common for start up businesses to look towards hard money loans due to the ease of approval. Hard money loans are not specific to business loans; in fact business loans are only a small percentage of the loans financed. Hard money loans are made against the value of a collateralized asset. This helps business owners with poor credit. These loans are not based on a borrower’s income and credit worthiness. Hard money lenders will base loan amount using a loan-to-value ratio (LTV). The LTV is a percentage of the property’s value. Typically, hard money lenders lend around 70% of the value of the property that is used as collateral.

There are a multitude of benefits of hard money business loans. They are easier to qualify for and the application process is simple. Most business owners are approved within a day and have funds within a couple of weeks. However, keep in mind you have to show that there is sufficient collateral value to offer the lender-- that is key. Conventional business loans are a huge pain to deal with. The application process itself is torture and most borrowers don’t hear for weeks about approval. Because hard money lenders aren’t banks they are able to be flexible when it comes to repayment schedules. Hard money loans are interest only loans; meaning the monthly payment will be interest only and there will be a balloon payment at the end of the loan. It is critical the business owners pay attention to the payment schedule and understand the process.

Hard money loans are short-term loans. These loans generally run from one to three years. However, there can be shorter or longer terms. Again, because of the flexibility allowed to lenders they can work with the borrower to arrange a loan that will work for them.

Hard money small business loans are a wonderful alternative for business owners who have found themselves unable to qualify for a conventional loan.

Generally, hard money lenders will lend about 70% of the value of the property. What that looks like is that a property is appraised at $250,000. The project the business owner needs to take a loan out for costs $125,000. Seventy percent of $250,000 is $175,000; more than enough for the owner to complete their project. Borrowers many have to go through a few hard money lenders to find the one that works best for their situation.