Alternative Business Loans For Arizona Entrepreneurs

When exploring business loan options in Arizona, company owners are often surprised by the various types of financing they have access to. And for many company owners, it is especially surprising the benefits to be gained when going to an alternative lender. 

Securing funding is the first step that must be taken when starting a business. And while many business owners will visit a local bank in hopes of getting a business loan, this type of lending comes with certain hurdles to overcome, especially when compared to going to an alternative lender.

Understanding the Benefits of Alternative Lending

There are many benefits to alternative lending. One of the primary benefits is that these types of lenders have a higher and faster approval rate, and secondly, they allow you to obtain funding in a shorter amount of time because they are an independent entity, resulting in a higher success rate.

When choosing to go with an alternative lender, borrowers will find that the lenders are more flexible in regards to qualifications that must be met. More so, when in need of financing for inventory purposes, alternative loans tend to be far more successful. In fact, most banks will not provide any type of financing for inventory. In addition, most alternative loans will not require the business owner to use his or her personal assets as a form of collateral for the financing; this not only increases a borrower’s confidence in being able to get approved, but it also adds to the personal security that the borrower is able to sustain in knowing they don’t have to put their personal assets on the line in order to secure a loan.

Credit Is Not an Issue

Another benefit of alternative financing is that when trying to obtain a business loan, your personal credit is not a factor. Unlike most banks, alternative lenders won’t dive deep into the borrower’s personal finances. Instead, they look at the merits of the company, not the borrower.

Save Time

Lastly, if you have ever applied for a loan at a bank before, then you know that the process can be arduous and lengthy, many times taking weeks to process. In fact, the actual loan application process can take upward of three months. By the time the bank is ready to fund your business loan, you may not need the money anymore. Or even worse, your business could be collapsing by the time the funding comes through.

The Takeaway

To maximize your business opportunities, especially in relation to time-sensitive matters like landing a new client, you should carefully consider the benefits to be gained by working with an alternative lender.

Phoenix Real Estate Growth in 2018

2017 was undoubtedly one of the best years to sell a home in metro Phoenix. An astonishing 93,500 houses in the Valley exchanged ownership last year, which was a six percent increase when compared to home sales in 2016. According to a senior housing analyst, Tina Tamboer, in comparison to the prior 15 years, only the years of 2004, 2005, and 2011 saw better home sales.

It was during those years that the housing market acted anything but normal. In fact, the housing boom during those years largely took place because of an excess in subprime mortgages, giving buyers incredible financing options for purchasing a home. This housing boom started in 2004 but didn’t last long, hitting its bottom in 2011. It was during that year, though, that investors quickly noticed they could snatch up foreclosure homes at bargain prices.

2017 was unquestionably a very healthy year for purchasing a home in the Valley. Tom Ruff, an expert real-estate analyst, predicted the year to be one of the best years for buying a home and says, “2005 went down in the history books as the year our housing bubble rapidly inflated. 2011 was the year housing prices bottomed out after the housing-market collapse.This leaves 2017 as the very best year for Valley resale homes in our history not influenced by some freakish market outlier.”

2017 Was Good, but It Still Wasn’t As Good as 2006

Even though 2017 was a strong year in regard to the appreciation of homes in the Valley, the peak levels occurred back in 2006. 2016 saw a seven percent increase in median sale prices for homes in the Valley and continued to climb another 6.5 percent in 2017. However, with a current median sale price of only $250,000, this still puts average selling prices $15,000 lower than they were in 2006.

Predictions for 2018

The housing market in 2018 is expected to perform just as well as it did in 2017, but there will be several factors working against the market, including:

  • Lack of affordable housing
  • Inflation
  • Interest rate hikes
  • New tax laws

Ruff goes on to say that “The challenge is to build more housing that people can afford. Valley prices can’t keep climbing at the current rate if people can’t find homes they can afford.” Tamboer predicts a softening in appreciation during 2018. She says home prices will continue to climb throughout the year, but they won’t do so at the same rate as they had during the past two years.

In order for Valley home prices to fully recover, they will need to increase by at least six percent. 

Hard Money Lending for Your Construction Project

When most people think of hard money lending situations, they think of borrowing the money to purchase a home you intend to use as an investment. However, this isn’t the only use for this type of loan. In fact, you can also use them for certain construction projects. The benefit of choosing these types of loans over traditional loans is you can borrow an amount based on the potential value of the completed project rather than the current value of the home.

Why Hard Money Lending Is Better

If you seek a traditional loan for your construction project, you will be severely limited based on the current value of your property and how much equity you have. Hard money lenders often operate differently. These individuals are more interested in the investment potential of a property and are thus more likely to lend you a larger amount based on how much the construction project is projected to increase the value of the property. They also don’t place importance on your current credit score or many of the other factors traditional lenders take into account to determine whether you qualify for a loan and for how much. These loans can be used to start a new project or complete an unfinished project you ran out of money to pay for.

How to Locate the Right Hard Money Lender

Not all hard money lenders are interested in borrowing to individuals who need the money for a construction project. This can make it a little more difficult to find the right one. First, it’s important to inquire whether they have experience in construction lending. Once you find several that offer lending for construction projects, look up reviews on third-party sites to ensure you work with an individual who has a solid reputation in the field. Once you choose a hard money lender, you will need to provide the precise details of your construction project. This can help them decide whether they are willing to take the risk of lending the money for this type of project. Once they evaluate the property, the scope of the project and the prospective increased value the project will bring, they will be able to offer the money you need to get the construction project done.

Choosing a hard money lender for your construction project is one of the fastest, easiest ways to fund this type of project. These types of loans are often easier to acquire than obtaining money from traditional lending institutions, such as banks, because they don’t look at the current value or even your credit history. They are more interested in the potential for the increase value of the property as an investment opportunity.

The Growing Popularity of Hard Money Loans

The past several years have seen significant growth in a certain lending trend– hard money loans. Though it has technically been around since the 1950s, this form of lending has grown in popularity for a variety of reasons. People are drawn to them because they tend to have faster documentation and approval processes, are mutually beneficial to the borrower and lender and are generally free of frivolous costs and fees, not to mention the fact that they are also not based on credit scores. But before deciding to jump on the bandwagon, both investors and potential borrowers should learn as much as possible about this arrangement.

Where Does ‘Hard Money’ Come From?

Rather than banks, hard money generally comes from private lenders. Instead of credit scores, it is based on assets and the value of the project or property the money will be funneled toward. This means fewer obstacles and, usually, less time between the loan application and the release of funds.

What Are Hard Money Loans Intended For?

Hard money loans are meant for projects like construction and remodeling, house flipping, property purchases and real estate transactions in general. They can be used for both long-term and short-term projects, but most financial experts recommend going for short-term because there is a lot more uncertainty with long-term situations. For example, project values can change, and borrowers may find that they still don’t have enough funds, or investors may see their returns not turn out as expected.

The Mutual Benefits

Again, the borrower often has faster access to the money they need in addition to having less red tape to cut through. Instead of having to go to a bank with a proposal or address a committee, the borrower deals directly with an individual or small group of lenders, and the approval process generally just consists of whether or not the lender will say “yes”. The lender meanwhile benefits by getting a higher return on their investment– in this setup interest is either a fixed amount or at a higher percentage than private banks. And just as the borrower gets the invested funds faster, the lender also has less paperwork and legal matters to wade through in order to get their return.

Know the Law

Generally speaking, there are actually not too many laws governing hard money loans (part of the reason the lending process is easier is because it’s largely unregulated). That said, certain states (like Tennessee and Arkansas) have restrictions placed on interest rates that can ultimately affect hard money arrangements. Both lenders and borrowers should thoroughly educate themselves on their local state laws before moving forward with a hard money deal.

The Bottom Line

Hard money loans will most likely continue to grow in most areas, especially in places where real estate and construction are booming. Interested borrowers should talk with local private lenders about this opportunity.

8 Reasons You May Need a Hard Money Loan

Most people are familiar with traditional loans for their business, but there are other options that can actually be more beneficial, such as hard money loans. There are many reasons you may want to look at hard money lenders in Arizona to provide you with the funding you need for your business purposes. In many cases, it can be difficult for those interested in investing in businesses to qualify for loans through banks and other traditional lenders because of the strict federal regulations. Even individuals who have a solid business plan and great credit history can be rejected through traditional methods. While not everyone is a good candidate for hard money lending, there are certain situations that benefit from these loans.

Reasons for Hard Money Loans

You should seek hard money lenders in Arizona if you match one of the following:

  • You need funds more quickly and have the escrow to back it up.
  • You want to avoid the red tape experienced with traditional loans.
  • You’ve gone through foreclosure or a short sale that has harmed your credit history.
  • You have declared bankruptcy or suffered another dent in your credit.
  • You are either self-employed or don’t have a stable job history.
  • You already own a number of investment properties.
  • You don’t have the assets and funds to qualify for traditional bank loans that require collateral.
  • You are the owner or representative of a non-profit organization, LLC, corporation or other entity that is searching for property.

Who Can Benefit

Most people who contact hard money lenders in Arizona do so because they need a short-term financing solution they can get more quickly than traditional loans. Private lenders will often approve a loan in as little as a week or two. than the weeks or months traditional loans can take. However, it’s important to realize the underwriting process is quite different, especially considering private hard money lenders don’t have to follow the same regulations set forth by the federal government. While you can expect an easier approval process, even if your credit is less than stellar, this doesn’t mean they will lend to just anyone. They may look at the credit score, but they will also consider a person’s character, their ability to pay back the loan in general and the value of the property. They will be able to structure a loan to best suit the needs of the individual, rather than following the regulations banks and other traditional lenders must follow.

If you’re in need of money to fund a business venture and don’t have a lot of time to spare, seeking assistance from hard money lenders in Arizona can be the ideal option.

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9 Commonly Asked Questions About Hard Money Loans

Not everyone is as familiar with hard money loans in Arizona as they are with traditional lending. However, these private loans can provide a benefit over other methods of lending. Before you explore this option for your business ventures, it can be beneficial to understand the answers to these common questions.

What Makes Hard Money Loans Different?

Hard money loans utilize the value of the property itself as the only collateral. This means the buyer’s assets and credit history have little to no bearing on their ability to get the financing they need. In addition, these loans come from private lenders who can set their own requirements.

How Do Interest Rates Vary?

In general, the interest charged on hard money loans is often higher than traditional loans because they are meant to be a short-term solution. However, underwriting and other costs are typically lower. These loans are sometimes used as interest-only loans with the principal due at the end or may work more like traditional loans with principal and interest factored into the payments.

How Does the Application Process Work?

Applying for hard money loans requires submitting a request to the investor themselves, rather than a banker who doesn’t have the final say. This can give you leverage for negotiations.

What Loan to Value Ratios Affect the Loan?

For the most part, loan to value ratios for hard money loans in Arizona fall between 50 and 65 percent. This rate can be based on the actual purchase price of the property or the prospective value of the property after repairs and improvements are made, whichever is higher. Banks typically use the lower of the two numbers for traditional lending.

How Long Do These Loans Last?

Hard money loans are designed to be used for shorter term solutions than traditional loans. Most of these loans last as little as six months but can be used up to two years when needed.

How Much Do They Cost?

One of the biggest concerns is cost. Buyers are typically required to pay for any underwriting services, including third-party appraisals and environmental reports, among others. However, it’s important to understand how much these fees should be to avoid lenders who are only looking to scam business owners.

Does Borrower Credit Matter?

If you’ve ever obtained a traditional bank loan, you know how important your credit is to obtaining a low interest rate and the funding your need for your business ventures. With hard money loans in Arizona, your credit will have little to no bearing on whether you will qualify for the loan. Instead, the loan will be based more on your character and the value of the property.

Do You Need Money Down?

In most cases, you will need to put some money down to mitigate the risk the lender is taking on. It also ensures buyers are more invested in the property and are less likely to just walk away and not pay the loan back.

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What Are Commercial Bridge Loans Good For?

When most people hear about bridge loans, they are typically talking about residential properties and helping homeowners transition from a home they are selling to a new one. While commercial bridge loans serve a similar purpose, they can also be used to free up capital to help businesses grow. Because of the way these bridge loans operate, they fall under the same category as hard money lending and are typically used for the short term. In fact, most of them last no more than six months. When used properly, these commercial bridge loans can be the ideal option.

The Right Situations

There are certain situations where commercial bridge loans can be extremely beneficial. These include:

  • Balloon payments are coming up and business owners have not yet made more permanent financing plans.
  • You find property you would like to buy that will likely sell fast, not allowing you to secure traditional financing in time..
  • Temporary financing is needed for improving on a business or to restore a damaged property before securing permanent financing.
  • Additional cash flow is needed for property costs while finding new tenants, preparing to sell or refinancing.

What You Should Know About Commercial Bridge Loans

Most private financing, including commercial bridge loans, come with higher interest rates because they are meant to be used over a shorter period of time and typically come with a higher level of risk. However, when you look at the benefits of these types of loans versus the cons, you will quickly realize these loans often have a much higher number of benefits. In fact, they can even increase the profits.

For most businesses that obtain a commercial bridge loan, the end goal is to provide temporary financing until more permanent options can be secured at the right price. Because these solutions are typically short-term and are meant to be paid off over a relatively short period of time, there are typically no prepayment penalties to worry about. If you are able to repay the loan before the terms require, you will simply be freed of the loan and able to move on without worrying about paying more in the process.

It’s important for companies to establish the right networking relationships to ensure they can get access to the resources they require. It’s important to find private money lenders who are able to assist with issues like commercial bridge loans that can bypass the more traditional methods of obtaining financing for business purposes. You never know you when you may be in a situation where you need money more quickly than traditional lending can provide it, putting you in a difficult position that could cost you important business progress.

10 Reasons Real Estate Investors Use Hard Money Loans

Traditional loans are typically ideal when you’re purchasing a home for your own use. However, if you’re looking to invest in real estate properties, you may want to choose hard money loans instead. There are a number of reasons this type of loan is better for investment purposes. The following will help you determine if this type of lending is the right option for your real estate investment opportunities.

Financial Shortcomings

One of the biggest challenges individuals face when they want to invest in real estate is getting approved for the loan they need. When you go through a traditional lending process, the bank or other institution will take a close look at your financial situation and determine your ability to pay back the loan based on those factors alone. However, when you are working with hard money lenders, who are typically individuals or private corporations, they don’t have to follow the same rules and regulations banks do, which means they are more likely to give you the funding you need to make the purchase, despite your financial situation. They see these opportunities differently and understand they will receive some return on their investment.

Faster Negotiations and Closings

The real estate market can be extremely fast paced, especially if you want to take advantage of low-cost properties that are relatively easy to flip and sell for a profit or are ideal for rentals. This means you need to be able to close fast and more easily negotiate with the seller so you can get the best possible deal. In many cases, sellers are eager to move to their new home and want to complete the sale as quickly as possible. If you are able to get the funds from a hard money lender within a couple of days, you are more likely to be accepted for a sale over someone who has to wait for their bank to approve and process their loan, even if it means accepting slightly less.

Ease of Reinvestment

If you’re turning properties over on a regular basis, you need to be able to easily transfer the equity you have in one property into another. This can be a complex process but can be made easier when you’re dealing with hard money lenders over traditional lenders. If you don’t aren’t able to easily transfer the equity from one home to purchase another, you can miss great opportunities. Banks will simply look at your request as additional debt. However, hard money lenders are more likely to see the equity in a home you are about to sell and will be willing to finance the next one until the home you currently own sells.

Outside Bank Guidelines

Banks operate under a strict set of guidelines in order to determine if you qualify for a loan. This means you are much more likely to be denied for a loan, especially if you are aware you don’t meet the qualifications. Because hard money lenders are typically private corporations or individuals, they don’t have to follow these regulations and are more likely to make exceptions to the rule. They will look at your capabilities, rather than the state of your financials, giving you the funding you need without worry over whether you will be approved for a traditional loan.

Free Advice

In many cases, hard money lenders have already worked with real estate investors and know a bit about the venture themselves. Because they are just as invested in the project as you are, they are likely to share information about their experiences with you, helping you build the investments you are looking for. This can help you grow your portfolio and ensure you are as successful as possible in your real estate investments.

Faster Approval for Commercial Loans

Not everyone is dedicated solely to investing in residential properties. However, when it comes to commercial loans, traditional banks and lenders are much slower than residential loans. In fact, getting approved for a commercial property loan can take four months or longer, leaving you in limbo and potentially losing you the property you want. The good news is hard money loans are a much simpler process and are likely to be approved faster so you can get started with making money from this investment. In fact, you could have your commercial loan in as little as a week.

Less Risk of Deal Failure

Have you ever attempted to purchase a property, only to find the bank backed out of the deal while you were in the escrow stages, costing you the deal in the end? With hard money lenders, you won’t have to worry about this problem. These individuals and private companies are far less likely to base their decisions based on your current financial state, which is the most common reasons for banks to pull their funding. Instead, these non-traditional lenders are more likely to look at the value of the assets to be purchased and the collateral so they can feel confident they will get the appropriate return on their investment. This will ensure you can complete your deals and get the right properties to help you make money.

Use Leverage

Banks will typically give you the money you need for your loan in the form of a check or similar. It will take time to generate this document, which can make buyers nervous about the deal in the end. When you work with hard money lenders instead, you are more likely to have the cash in your hand when you go to the closing table. Sellers often like to receive cash because they won’t have to worry about whether that check will bounce. You can use this as leverage when you are trying to make a deal, sometimes landing a better selling price than someone who may go through a traditional lender. Hard money lending can also free up cash for those unexpected renovation projects that may come up.

Loan Approval, Even with Blemishes

If you don’t have pristine credit, it can be extremely difficult to get a traditional loan for investment properties. This is because banks take your credit history into strong consideration when approving or denying these loans. Those who are willing to invest in properties through hard money lending won’t often care about these issues as long as they are relatively minor or unrelated to real estate entirely. Instead, they will look at the value of the properties you are intending to buy so they can be sure they will get their money back.

A Customized Loan Package

Because banks are more rigid in their lending practices, you will find they aren’t as willing to work with you when putting together your loan. This means if you need additional money to make renovations to maximize your investment potential, they aren’t likely to approve it beyond the value of the property itself. However, hard money lenders will take these details into account and are likely to give you the additional funds needed to complete these projects. This is because it increases the earning potential of your investments, which benefits them as well. The end result is you can get the loans you need on your terms, giving you the opportunity to make the most of your investment.

Is a Bridge Finance Loan Right for You

When most people think of real estate investments, they think of traditional loans in order to purchase these properties. However, this is no longer the only option. Bridge loans, otherwise known as hard money lending, can be the ideal way to invest in real estate. These loans are typically offered by private companies or individuals who are looking to invest but don’t want to take the hands-on approach. Unfortunately, this method isn’t right for everyone. Therefore, it’s important to evaluate it closely to determine whether you should consider a bridge finance loan the next time you’re thinking of investing in real estate.

Traditional Loans Don’t Work

One of the biggest reasons individuals think about obtaining bridge loans for their real estate purchases is because they have already been turned down by traditional lenders. Those who offer hard money loans typically have fewer restrictions and operate under a different set of regulations, which can make it easier to obtain the funding you need. They will be able to offer you more money than traditional lenders because they are often willing to take the risk and won’t have to base their loan off your own credit history. The choice is entirely theirs to make.

Fast Money

Going through traditional methods of obtaining a loan for real estate purchases can often take time. Banks and other traditional lenders can take days or even weeks to go over your finances before making their final decision and offering you a specified amount of money for your loan. Bridge loan lenders will typically be able to get you your money much faster so you can move forward with your investments and close on these purchases in a timely manner. With the quick turnaround, you reduce the risk you will miss out on the right investment.

Non-Traditional Situations

Sometimes you want to invest in real estate that doesn’t fit the norms for real estate investments. If you were to ask a bank for a loan in these situations, chances are you would be denied the money you need. However, individuals and private companies willing to offer hard money loans are typically more flexible and willing to work with investors. They will be able to evaluate whether the type of real estate you want to invest in is a smart choice for them and are more likely to give you the funds you are looking for.

Bridge finance loans can be a great way to get the money you need for your real estate investments. While traditional bank loans are still sometimes the better option, for those who have been turned down, need the money more quickly or are looking at non-traditional investments, hard money lenders can often be a smart choice.

3 Facts About Trust Deed Investing

When you’re looking for ways to invest, one of the lesser known option is trust deed investing. Through this method, you are able to invest in real estate with a lower risk than through other methods and with a higher chance of a good return on your investment. The good news is you will be able to invest in real estate without taking a hands-on approach that requires a high level of expertise. The following facts can help you determine if trust deed investing is right for you.

High Returns

Investing in the stock market can be extremely volatile and unpredictable. You may work hard to build a balanced portfolio, but there are never any guarantees it will perform well. When you invest in trust deeds, you will be guaranteed a specific return over a specified period of time. These returns are often much higher than you will see on other types of investments, unless you take a major risk that isn’t guaranteed to succeed. A trust deed investment can best be compared to a high-return bond with a fixed rate.

A Low Entry Point

When you consider trust deed investing, you won’t need a particularly large amount of money to begin. In most situations, you can get started for as little as $25,000. If you think about it, you would typically need to spend much more if you were to buy a home directly, which is why this type of investment can be quite lucrative. You won’t have to make as large of an investment and can still see the same high returns you would get if you purchased a residential property for your own investment purposes.

Security

Trust deed investments carry a fixed rate of return so you don’t need to worry about how much money you will make on your venture. It won’t matter if the market goes up or down during the time in which your investment is in place; you will receive the same return you signed up for. You also won’t need to keep as close of an eye on the market in order to sell quickly if it appears the value is beginning to slide. You will know exactly what you are up against the entire time, making this a relatively low-risk investment to help you build a solid portfolio.

Choosing the right methods of investing can be a difficult task. It’s important to keep in mind a diverse portfolio is more likely to provide the greatest returns for your investment. However, adding trust deed investing as part of your portfolio provides you with a guarantee many of your other investment options simply can’t provide, making it a great choice for all levels of investors.