Money Lending Business
The Difference Between Private Lending and Hard Money Lending
Major lending institutions, such as banks, are great for standard loans. However, when it comes to smaller amounts or alternative lending solutions, banks usually cannot accommodate the needs of the prospective borrower like specific a money lending business. This is where having a private lending or hard money lending company shines.
Private Lending vs. Hard Money Lending
If you are interested in starting a money lending business and structuring loans that utilize your own funds as the source of money, then you want to look into opening a private lending company. Not only does this involve a great deal of risk on the part of the business owner, but there also need to be fail safe systems implemented, in order to ensure payments are made on time, and to handle late payments, clients who default on loans, and collections.
Hard money lenders, on the other hand, work with brokers and other sources of money broker businesses in order to structure loans for their clients. This greatly reduces the risk and out-of-pocket spending, plus most of the business will come your way through capital investors, accountants, and even bank referrals for customers who do not quite fit within the structure of a conventional lending institution.
Private money lending also requires the ability to accurately appraise any collateral the client puts up against the loan request. It is prudent to check your appraisals with two or more other sources, just to ensure that the client is putting up assets that are comparable to the amount you are lending.
In addition to all of this, private money lenders also need to keep up with insurance policies. Make sure your clients’ assets are insured against fire, and that they have liability insurance. When structuring a loan, your clients will need to add you to their policy and the insurance company must be informed why you are being added. This way, if something happens to the assets used for collateral, the reimbursement check will be sent to you.
Hard money lenders also have the flexibility to offer short-term or long-term financing. Short-term loans usually have higher fees and interest attached to them, because of the immediate need for working capital, while long-term loans provide a stable profit over the course of years.
In addition to the aforementioned network of investors and brokers, hard money lenders should also work with lawyers familiar with your state’s lending laws, as well as federal regulations for lending. Many lenders also advise working with other hard money lenders to stay familiar with the underwriting process, to ensure that you (as well as the other investors) get paid.
For Both Private and Hard Money Lenders
Both hard money lenders and private lenders alike a money lending business needs to document their loans right down to the smallest details. Even if loans are never finalized, it is a good idea to keep the portfolio on hand in case those clients come back at a future date. When it comes to lending of any sort, there is no such thing as too much information.
There is nothing wrong with increasing your lending radius for you operation. Many lenders make the mistake of keeping a tight geographic radius – often offering loans only within the city where the lender is established. By increasing your reach, you are also making your services available to more potential customers, which means more potential profits for investors, and faster business growth.
If you are interested in starting a money lending business, we offer a in-depth finance training program that provides you with everything you need to start your very own commercial finance business.
Commercial financing usually involves someone acting as a liaison between business owners and money lenders in order to reach an agreement. Since more than 60% of all conventional loan applications are rejected by banks, business owners are forced to look at alternative lending methods.
The Commercial Capital Financing Group (CCTG) trains people in all aspects of business ownership and commercial lending so they can start bringing people together in order to make these deals happen. CCTG give you the tools you need, plus one-on-one support 24/7 from out professional staff with over 75 years of commercial finance experience.
Most people who enter the field of commercial business lending have small fees that still end up being much more than they were seeing from their previous employers (many see more money after a few deals than they did annually when they were working fro someone else).
If you are interesting in starting a money lending business, and like the idea of a six-figure potential income on your terms, while also helping other business owners and investors, check out CCTG today!