Asset Based Loans

When a company needs fast cash to complete a real estate transaction, it might not be able to work with a traditional lender. In these situations, it may be better to get a hard money loan, which leverages the value of the property itself as collateral. These loans are more flexible since lenders tend to be investors, not banks. Companies that may not qualify for other financing options can often get hard money funding instead.
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Working with a traditional bank or lender can be challenging for many companies for various reasons. Enterprises with a low credit score or short sales history might not qualify for different commercial loan options.

When trying to purchase equipment or real estate, these challenges can prevent a business from moving forward with a project. In these cases, the company can typically work with a hard money lender to get flexible options. Usually, these lenders are individual investors who don’t have to work under a bank’s restrictions to approve the loan.

Hard money and bridge loans are often used to purchase high-end equipment and real estate since the value of the item works as collateral. Hard money investors don’t necessarily need to see excellent credit scores or repayment history either. Instead, if the machinery or property value is high enough, it can be secured as collateral.

While this financing option works well for businesses that can’t get funded elsewhere, it does come with challenges. First, these loans are typically much shorter than traditional mortgages, with some terms lasting a year or less. Second, hard money lenders often charge higher interest rates, so the borrower has to pay more in the long run.

Loan Highlights

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Most hard money loans are used to purchase real estate or high-end equipment.
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Loan terms are usually within one to five years
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Interest rates are higher, but it’s easier to qualify
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Hard money financing is much faster than traditional lenders, with money coming through in days, not weeks
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Loan payments may be interest-only, with a balloon payment due at the end of the term

Asset Based Loan Pros and Cons

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Companies that can’t get approved elsewhere can usually get a hard money loan
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Financing options are more flexible and come through faster
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Borrowers don’t necessarily need a high credit score or low debt to income ratio to qualify
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Interest rates may be higher than traditional loans
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Repayment terms are shorter – usually one to five years
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Hard money loans can be more expensive in the long term
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