Are Hard Money Lenders Just Loan Sharks?

This is a question often posed in the real estate industry: are hard money lenders indeed just preying on the public and in fact, just loan sharks?

In today’s downturned economy with traditional financial institutions loaning less capital to small businesses, many employers are struggling to stay afloat. Real estate investment, once a lucrative business in the late 1990’s to mid-2000’s has become a high-risk industry, one fraught with short-sales and foreclosures.

While some people consider hard money lenders to be predatory to the loan industry, the question must be asked: Who else is willing to lend these small businesses funds in critically dire times? If hard money lenders were not available to help provide ways and means, many of these small businesses would have one alternative: to shut their doors and join the growing unemployment ranks.

Struggling to help keep the real estate industry afloat, hard money lenders loan funds to individual borrowers based on the specific property in question and consider the potential resale profit. Hard money loans are not bank’s standard 30-year traditional home mortgage loans; these types of loans are designed to carry investors for a few months to a few years, while their investment grows and matures into a profit.

As hard money lenders loan based on investment risks, they typically don’t look through finances and credit scores with a fine-tooth comb. Instead they look at how probable it is that a person and/or company will make their hard money loan payments, including those on apartments and buildings.

Because the investors who participate in private money lending are taking substantial risks, the interest rates are higher. Banks are backed and protected by thousands of lending laws, which results in a large group of borrowers that have nowhere else to turn for money and financial gain. Largely unregulated by state and federal laws, private money lenders are able to work around bipartisan politics and Washington D.C. gridlock to overcome this financial crisis, resolving to loan money to deserving parties who make sound, qualified investments.

Yes, private lenders are for-profit organizations, but they also play a critical role in helping the economy bounce back, especially the U.S. real estate market, which has been dealt devastating blow after blow. While hard money loans may be expensive, they are helping keep businesses afloat during a difficult recession. While some critics may disagree, at least hard money lenders are available for businesses that are in need of cash.

For parties interested in obtaining a hard money loan, Loan Funding Co. is a direct hard money lender that loans between $50,000 to $25 million on loans.