Hard Money and Private Money Construction Completion Loans

In the construction industry, every project is time-sensitive and speed can make or break the success of the project. When you’re confident that your efforts will result in excellent profits, you don’t want to wait around for slow financing. Although traditional finance is available for construction completion loans, it isn’t always quick and easy to get an institutional loan. Even when you are eligible, you may find that the application to delivery time is too slow for your construction project. Another option is to choose a hard money or private money loan for your construction completion project.

What is a hard money construction completion loan?

In traditional finance, a construction completion loan is the money you secure to complete your building project. Like many traditional financial avenues, you may spend weeks or months completing and finalizing the application. In contrast, hard money and private money construction completion loans can arrive in as few as seven days.

Hard money construction completion loans involve borrowing cash from a private investor. Technically, borrowing money from a friend or family member would count. When you head down the private money route you open yourself up to rapid completion times, more lending options, and flexible borrowing terms. They usually carry slightly higher interest rates of 7 to 12-percent. However, you can access and repay them rapidly, which provides you with an advantage when you’re trying to make a quick profit with your construction project.

When should you use a private money construction completion loan?

In many cases, borrowers need to use private money construction completion loans when their credit score is less than ideal. Or, you may find that your credit score is excellent but your status as a self-employed person turns off traditional lenders. Although your credit score is still a factor, private lenders are more flexible and you can access cash in otherwise challenging circumstances. Similarly, hard money loans are perfect when you need rapid financing. You may also want to choose this route if you plan on repaying the loan in 30 days or less. Such repayment terms rarely benefit banks as they don’t have long interest periods. They do, however, benefit private money investors.

How can I benefit from a hard money loan?

Aside from those with poor credit and individuals who need quick response times, borrowers who seek flexible loan terms may also benefit. Private investors that provide hard money loans will lend to those whose projects appear profitable. If said projects match their financial interests, they may allow different payment terms than banks will. If you’re seeking alternative repayment arrangements, it’s worth discussing them with a hard money construction completion loan broker.

Why would you want a construction completion loan?

Construction completion loans usually cover short financing periods. You’re unlikely to use one for any longer than three years. However, sometimes you may find it difficult to access one or you might find yourself in a time-sensitive situation. For example, if you spot the perfect contractor and you want immediate cash, there’s no reason to wait around for a traditional application. With the money in your pocket, you can hire the contractors you need and complete your project on time.

Another common reason for needing a hard money construction completion loan is running over budget. Even with the best of intentions, you might find that a combination of contractor price increases and underestimating the money you need to spend could bring your project to a halt. Rather than waiting for standard lines of credit, you can get back on track using a private money loan. Accessing the cash quickly makes perfect financial sense. When you’re able to move ahead with your project, you bring yourself closer to making a profit.

How can you get a private money loan?

As you’ve already seen, private money loans come from private investors. The same goes for hard money loans. However, unless you have a pool of said investors at your fingertips, you’re unlikely to have access to the same options a broker can provide. Your hard money loan broker has a network of investors, and they know them well. When you approach a broker with your construction completion loan requirements, they’ll match you with a lender that is a good fit. In addition to providing you with more options, they have the skills you need to find the right repayment terms.

Ultimately, using a private money loan broker also means you’ll speed up the application process. As a result, you’ll enjoy your new financing option in its best form: it will be quick and ideal for you to finish the construction project.