QUICK INTRODUCTION TO PRIVATE MONEY LOANS

BELOW YOU’LL FIND INFORMATION THAT CAN INCREASE YOUR CHANCES of getting private money funding. Understanding the ins and outs of private money could make the difference between getting money and not getting money. However you don’t need to memorize anything and there will be no test on this material).

WHAT MAKES A LOAN A PRIVATE MONEY LOAN?

1. Traditional institutional lenders like banks, trusts, pension funds, or credit unions are not private lenders, although some have units that deal with private money.

2. Private lenders may be individuals, corporations, venture capital firms, limited partnerships or certain other types of business entities.

3. Private money loans are typically non-conventional commercial real estate loans secured by real estate. They are often called hard money loans.

4. Hard money lenders make private money loans. Many private money lenders make hard money loans.

TWO MAIN TYPES OF PRIVATE MONEY FUNDING ARE:

5. Loans for business or real estate , which must be paid back over time

6. Investments in a business or real estate project, which do not have to be paid back.

Investments come from wealthy private individuals (“angels”) or groups such as venture capital (VC) firms. Investors may take part ownership of a business to earn a return on their investment as the business grows.

POTENTIAL ADVANTAGES OF PRIVATE MONEY include:

7. Private lenders are less bogged down by bank paperwork, government regulations and institutional protocol

8. Time from initial loan request to funding is faster

9. Private money loans are more flexible. For example, private lenders and investors are more likely to offer funding to “high risk” business or real estate deals.

BORROWERS CAN USE PRIVATE MONEY LOANS for many business and real estate purposes, although lenders can restrict loans to specific uses. Common purposes of private money loans include:

10. Rehabbing a property

11. Acquiring bridge money

12. Providing short-term operating capital

13. Equipping an office or research facility

14. Making a down payment on real estate

15. Buying real property

16. and more

PRIVATE INVESTORS

Business Angels are wealthy individuals who invest a portion of their money into real estate or a business in the hope of making a good return on their investments. These investors may come to the rescue of a new and promising business that finds it hard to obtain financing. They generally seek companies or projects that:

 Show great profit potential

 Will grow fast

 Are more than small “mom and pop” types of businesses

CREDIT UNIONS—THE UNKNOWN AND UNTAPPED LOAN SOURCE

IF YOU’RE LOOKING FOR A REAL ESTATE OR BUSINESS LOAN, be sure to include local Credit Unions in your search. Why do we suggest this? Because, Credit Unions:

• Have not suffered from bad real estate loans in the current crisis.
• Have loads of cash they want to put into good loans.
• Have understanding boards of directors who want to “put money out.”
• Have a history of lower interest rates on loans than many other lenders.

CREDIT UNIONS MAKE MANY DIFFERENT TYPES OF LOANS. But the types that would
interest you most as a business person are:

• Commercial and residential real estate loans.
• Business loans for startup, expansion, renovation, etc.

TO GET EITHER TYPE OF LOAN, the borrower must meet certain minimum, low- or no-cost needs, namely:

• Be a member of the Credit Union from which you want to borrow. There’s NO charge to you to join a Credit Union.
• Fill out the Loan Application for the type of loan you seek.
• Agree to the repayment schedule the Credit Union sets.
• Sign all needed documents—which usually are fewer than with a bank.
• Receive your loan check and start making P & I (Principal and Interest)
payments one month after you get your money.

THE “WAY TO GO” TODAY IS “WHERE THE MONEY IS” and that’s what you’re doing when you seek your real estate or business loan at a local Credit Union. You’ll get a friendly reception and utmost cooperation when you submit your Loan Application in a businesslike way and treat the CU staff courteously.

Find Your Niche—Learn About Loans To Buy Or Rehab Apartment Buildings

APARTMENT OR MULTI-FAMILY LENDERS can be found in most urban and suburban
areas. Even so, many wealth builders looking to acquire an apartment building can use a good loan Finder to steer them in the right direction. And many potential borrowers will pay a good commission to a loan Finder that helps them find the best loan possible.

A MULTI-FAMILY BUILDING IS ONE THAT HAS FIVE OR MORE UNITS. The most common purpose of most apartment building loans is to fund the purchase or refinance of a multifamily building. Loans for rehabbing buildings are just as important, however. A large number of commercial lenders make this type of loan. Look for lenders that offer loan packages for rehabbing apartment buildings. Here are your steps:

1. Gather all the information from your client as to what financing he or she needs. This might include loan applications, summaries of the proposed purchase/rehab, plans to produce an income from the building, and so on.
2. Draw up a “C” list (long list) of all potential lenders from a source such as the list below.
3. Sift through each lender’s information, one at a time.
4. Pay special attention to basic data such as the geographic areas, loan purpose, loan type, and loan requirements and details of each lender.
5. Based on Steps 2 and 3, narrow your “C” list to a “B” list (middle list) of lenders to examine more closely. For example, you can eliminate “C” lenders that don’t make loans in the area where the building is located.
6. Compare the types of funding that each one offers.
7. Make note of each lender that might make the size and types of loans you seek in your area
8. Select your “A” list (short list) of lenders to study further and to contact for more information or a loan application.
   

AS A FINDER, YOU CAN DO EACH OF THESE STEPS for your client, who willprobably be busy on other projects. Your client may offer to work together with you in drafting your “A” or “B” lists. If your client doesn’t suggest this, suggest it to the client. With a little experience and motivation, you and your client can make a winning team.

Special Funding for Financial Brokers

You Can Become the Loan Expert for Special Loans

If you or a client of yours has a small business in need of funding,
you may have looked at common sources of money—business
partners, family, conventional bank loans, even SBA 7A guaranteed
loans from banks and non-bank lenders. If you’ve tried these
and met with little or no success, don’t give up.

There are many “niche” or special financing programs
for small businesses throughout the United States.
Some niche loan programs are targeted to help specific
industries grow in a particular area. Some are targeted
to improve the economy in a region, state, or local area.
Some are targeted to specific groups of people. Nearly
all niche loan programs have a social, economic development
or community development purpose.

Tips for Financial Brokers

If you are a commercial loan broker or you want to
become one, finding good niche markets that can
give you great broker income may mean focusing on
commercial loan deals. Without limiting yourself
to any specific kind of loan, you can turn your focus
to one or more of the available niche markets in
commercial lending to increase your immediate and
long term income. Take another look at the niche areas
of commercial lending above to see what a wide range
of commercial lending exists.

By concentrating on commercial loans that require
hard money loans, you can find a niche within a niche.
The more focused you get, the smaller your potential
market, so be careful to keep enough commercial loan
niches in your sights to keep the loan requests flowing.

The advantage of taking the time to specialize in a niche
commercial loan market is simple. Once you put
in the legwork to identify, contact and establish a
relationship with direct commercial loan funding sources,
regardless of whether they are hard money lenders or
non-hard money lenders—you can establish yourself
as the expert in those kinds of loans in the area where you work.

You will have a ready source for funding the niche commercial
loans you’ve chosen to specialize in, and you’ll not only get direct
requests from borrowers, but also from other brokers who’ll call
you and ask you to cooperate on this kind of loan.

To be successful, promote yourself on Internet forums, through
email and advertising to your target groups, and by offering your
thoughts on your commercial loan niche market to newspapers,
magazines, and Internet e-zines.

Write articles about such things as your specialty, how to
prepare a commercial loan package for best results, what to look
for to help ensure which lender best suits the loan request and
more. Don’t be afraid to educate your fellow brokers. By doing so,
you’ll show your expertise in more areas than the ones you share
in your commercial loan specialty articles. Other brokers, as well
as borrowers, will still come to you—after all, you are the expert
in your commercial loan niche market.