Venture Capital Business Loan No Credit No Collateral

Business Loan With No Credit

Would you like to have access to capital to fund your small business based on your business plan regardless of your credit and with no collateral. You must just prove your ability to repay the loan with a solid business plan, financial projections and the expertise or experience to execute said plan.

Funds are available from private equity lenders and venture capitalist to finance a viable business based on a solid business plan with a projected revenue to service your loan and become profitable. There is no minimum credit score. There is no collateral needed. There is no need to be in business for two or more years with proven cash flow track record. All you need to do is sell the private investors on your business plan and you can be funded.

Debt or Equity Financing

There are two types of financing available. You can choose debt financing which is just a loan. Or you can choose equity financing, which requires you to give the private equity investor a share of your company. This is simply selling stock in your company. In the short term debt financing is much more expensive. The costs is relative to the risks. If you are seeking capital from a corporation that does not evaluate your credit, requires no collateral and does not demand a proven track record, you must understand this loan will be very expensive.

On the other hand if you give an equity position to your company you owe nothing in the beginning, but in the long run when you are successful you will pay much more for an equity partner.

In either case the venture capitalist is betting on your success. Many people fail. Banks and traditional financing sources have a very low tolerance for risks and therefore their reward (costs) are relatively low.

Therefore, if you have a viable business plan that can be very successful with the right infusion of capital, consider venture capital or private equity investment into your company.

The Costs

As an example of the potential costs a business might pay a private investor 33.33% of the loan amount the first year and a smaller interest rate (like 10%) for a five or ten year term. Those terms sound absurdly ridiculous and at first glance most businesses would reject that type of financing even with no other options. But, if you analyze the benefits and determine the profit far outweighs the costs you might consider this option. For example, I recently encountered a business plan that the owners needed to borrow $100,000 and would net $300,000 in year one and over $1,000,000 annually thereafter. Is $50,000 too much to spend to become a millionaire? If I could I would do that 10 times a week.

The Solution

So weigh your options. Venture capital financing and private equity are expensive financing alternatives. Will your company be profitable enough to afford these options? Will your business qualify for any other means to raise capital? Only you can determine that answer. This is not the right option for everyone. Is it right for you?

 

Share

Commercial Hard Money Loans and The Short Sale

Commercial Hard Money Loans

The Essence of the commercial real estate hard money loan (HML) is based on the fact that they are short term loans for real estate investors to purchase and or rehab investment property that has substantial real equity. Commercial Real Estate Investors can make lots of money investing in properties using a hard money loan. For traditional financing the value of the property is the lesser of the purchase price or the appraised value. This definition does not account for distressed property which may be sold below market value and thus has real equity when compared to similar properties. This definition works for traditional lending as the best definition of value. It is impossible to determine future value of property that may not be in good condition or may have other appraisal value issues that may stop the property from being sold on the to a traditional consumer instead of an investor. There are greater risks inherent in a property that needs to be renovated and does not meet its highest or best use.

Invest with Hard Money Loans

The HML or bridge loans are only made to real estate investors on commercial and residential properties that will only be used by the investor as an investment (not owner occupied) property. This is to keep in line with the laws of usury and predatory lending. To charge higher fees and interest rates to consumers is illegal. Real Estate Investing is a business. Businesses are should know enough to determine the risk and reward of an investment and therefore have no “consumer protection” like predatory lending. Business owners can determine which course of financing they would pursue and if the cost are justified by the potential reward. I would never finance my home or suggest anyone to do so using a HML. There are situations I would invest in a short sale property that I can purchase at 30% to 50% below the true market value even if it costs me 10% in fees and double the normal interest rate. So even assuming this adds 15% to the costs I would still be way ahead when I refinance or sell the property.

Lending Institutions

Many financial institutions are willing to accept less than what is owed them on the sale of properties they have lent money on to avoid having another none preforming asset being added to their books. Non performing assets mean that a bank will be judged by federal regulators as making bad loans. This puts them at risks of takeover or just reduces their rating as a prudent bank. Banks are not in the real estate management or RE sales business. Therefore, there is a limit to the number of RE properties they can own or manage. All these are reasons to accept less (accept a short sale) versus accept nothing and carry another none performing asset on the balance sheet. This is neither good to regulators or shareholders as it drives the value of the financial institution down.

Another reason banks accept short sales is that if they have to foreclose on a property that adds maintenance, Realtor and legal costs while the market value of a property reduces greatly when the occupant is evicted and the building sits vacant. So who can say the reduced amount the bank accepts as a short sale would not ultimately be more than they may have otherwise gotten off of a deal via foreclosure and the vacancy of a property.

Commercial Bridge Loans and The Short Sale.

These reasons the door for investors to purchase commercial real estate below market value employing the short sale and use hard money loans to finance these deals is wide open. The real estate investors will have the benefit of putting little or no money down and even get funds to rehabilitate the building to make them more saleable or qualify for conventional refinancing once stabilized. To properly employ creative financing, hard money lenders and other strategies to purchase commercial investment properties seek the advice of competent, experienced and creative lenders with integrity.

Share

Qualify For a Hard Money Loan

Hard Money Loan Qualifications.

Investors ask me to send them information on a hard money loan. It is hard to tell them exactly what the qualifications are for financing their project. The options vary greatly because hard money lenders are private investors. Some are individuals others are private trusts or small investment funds. Each private investor creates their own guidelines. Unlike conventional residential mortgage financing there is no secondary market and there are no organizations like Fannie Mae or Freddie Mac t0 establish uniform or conforming guidelines. But each hard money lender has certain criteria that they evaluate. The qualifications that each bridge and real estate rehab lender have in common are:

  1. The property type and after rehab value.
  2. The exit strategy.
  3. The down payment.
  4. The investors experience.
  5. The investors credit.
  6. The investors cash reserves.

The Property.

There was a time and will be again were the property and the after rehab value of the property was the sole consideration of doing a short term loan to a real estate investor. Whether the deal is commercial or residential investment property this remains the most important key to the deal. The reasons it is not the only criteria is that lenders have been burned by the declining value of properties and the excess of properties available. This means they have to taken collateral for the short term loan and the exit strategy of the borrower did not work. If the investor foreclosed the values have less than anticipated and the cost are more because it takes longer to dispose of these properties. Yet the collateral still remains the most important criteria. The lower the loan to value the better the deal. Even though some lenders will go as high as 65 to 70% of the after rehab value those deals are tough when so many are available at or below 50%. As an investor you should seek to purchase property where all cost involved in purchasing, renovating, and your exit strategy would equal to less than 50% of the after rehab value.

The Exit Strategy.

Almost of equal importance to the collateral to many purchase rehab lenders is the requirement for a solid verifiable exit strategy. If you say you are going to sell it you should have a buyer who is pre-approved and their information needs to be verifiable by the lender. If you say you want to refinance the property then you need to have the income, credit and assets to qualify for a conventional refinance loan. Whatever your exit strategy is it must be verifiable by the lender. This is good for the lender and for you. No one wants to get stuck with non performing assets.

Down Payment.

Though there are programs that do not require down payment they are fewer than ever. Most hard money lenders require a down payment. For this reason it is good to be prepared to invest 20% to 30% in your projects. Because there are so many projects available yet funds are limited a down payment makes your project easier to fund. Also if you have poor credit assets help. That said, there are ways to purchase distressed properties with little or no money down.

The Investor.

The credit, assets and experience of the investor play a significant role in the underwriting  process. For a real estate investor to qualify they should have good credit, assets and experience. If you as an investor are not strong in all areas then you need to be stronger in others. Meaning the deal with lower than 50% loan to value, a strong exit strategy and or a down payment will be considered favorably even if the credit, income and assets are not the best. Because each private investor has different criteria, it is hard to say one deal will qualify and another would not based on one criteria or another. But, the property, exit strategy and assets are most important. Many deals will qualify solely on the after rehab value of the property, the exit strategy and the down payment. Even though there are no down payment deals available you need to be a strong investor to qualify for them.

Share