If you are starting up a new business or wanting to expand an existing one, chances are you will need financing. Whether looking to buy property, machinery, material, or other high cost items, getting the financing to do so can be tough in today’s economic climate.You will find this to be especially true when trying to go through a traditional bank. Even if you are able to get the funding that you’re looking for, you will be waiting for months before the loan finally gets funded. In the recent past, the number of borrowers that have defaulted on their loans has risen drastically. For that reason, banks are being much more cautious before financing any business venture. They are going to be very picky when they do credit checks. If there are any issues, they are going to be quick to turn you down.

Fortunately there are still options for getting financed. Due to the banks refusing to provide funding in today’s economy, a lot of loans are being privately funded. Many private lenders will lend their own money for their own portfolios. These lenders are generally funded by hedge funds or wealthy individuals with large pools of capital. The breakdown of the collateralized mortgage bond market has not crippled these unique lenders. Originating loans is not an issue for them because they don’t have to worry about who may or may not want to buy them. Another benefit to private loans, or hard money loans is that they take a very short amount of time to close, as opposed to conventional loans which often take a few months to fund if you are even able to get the approved. You generally don’t have to worry about a loan committee or huge stacks of paperwork. There are no complex ratios to deal with either. If they like your deal and you have shown them that you can pay back the loan back, then usually they will close your loan no matter how things are going in the conventional marketplace.

Do not get discouraged due to the fact that the conventional mortgage industries aren’t willing to offer financing because there are plenty of commercial mortgage lenders that are able to fund your deal

For anyone seeking residential hard money loans, time is of the essence. The major reason that people seek this kind of unconventional financing is because banks simply take too long, or they are unable to meet the increasingly strict criteria that the lending institutions put forth.

There is some confusion over what the money can be used for. One reason for the confusion is that lenders and brokers use different terminology. In some cases, they mean to confuse the borrower. In others, they simply forget that everyone is not as “savvy” as they are. Below, you will find some common terms used by financers and what those terms usually mean.

Acquisition loans are hard money home loans used to purchase a property. The amount available will vary depending on the lender. It is usually a percentage of the appraised value. Commercial banks typically require that you have around 20% of the purchase price. Else, they will charge a higher interest rate. Private lenders may be able to finance the entire amount and the closing costs are usually lower.

Construction loans may be used to build a residence, but they can also be used for repairs, expansions or upgrades. Current homeowners or real estate investors may be interested in these types of hard money home loans. Conventional lenders typically require that the property in question is or will be your main residence before they will approve financing. Private lenders are usually more flexible.

Mezzanine loans typically refer to residential hard money loans that are similar to second mortgages, but the term may also be used to refer to specific kinds of business loans. Mezzanine loans are short term, typically three years or less. The funds may be used for a variety of reasons, including “buying out” a business partner. The amount that you can borrow depends on the resale value of your home or business, minus the amount of other outstanding loans, such as a first mortgage, in other words, the amount of equity that you have.

Asset based hard money home loans may be used for any purpose, as long as you have collateral or assets to “put up”. Conventional lenders refer to them as secured loans. The primary difference is the time that it takes to complete the loan, but there may be other differences. If you have collateral, private lenders may not be as concerned by your credit score. For conventional lenders, a less than perfect credit score may end up costing you thousands of dollars more, because of higher interest rates, if they will approve the loan at all.

Bridge loans fill in the gap when permanent financing solutions are in the works, but the actual purchase needs to be completed quickly. Bridges may be commercial or residential hard money loans. The funds can be used for practically anything. Depending on the lender, there may be no limit to the amount you can borrow. The funds are made available to you quickly. But, bridge loans are very short term solutions, typically not more than 6-24 months. So, you need to know where your long term financing is coming from.

Both private and commercial lenders might use other terms that you do not understand. The best advice: When you do not understand, ask for clarification. As mentioned above, some lenders simply forget that everyone is not familiar with the “lingo”. If a lender is unwilling to explain something to you fully, then you should probably seek another source for your residential hard money loans.

Perhaps you have seen the term ‘special finance auto loan’ online when you were shopping around for car loans. If you are not familiar with the term, what it means is that auto loans are available to people with poor or bad credit. The most recent statistics tell us that sixty percent of all consumers have less than perfect credit. These consumers are not typically allowed to borrow money from traditional banks because banks check credit ratings and flatly refuse to loan people with bad credit money. People with bad credit are considered to be ‘special’ cases, so hence the term special finance auto loan was contrived.

Special loans for auto finance are widely available today. As the economy has taken another turn for the worse, more and more people are struggling financially. Many people are falling behind on their bills and cannot pay off their credit balances on time. This leads to the fall in their credit rating, making it impossible to buy a new car, as traditional banks refuse to lend them money. However, thanks to the special finance auto loan the typical consumer who is having money troubles can drive the car of their dreams, as many lenders have emerged over the past couple of years offering to lend money to ‘high-risk’ individuals.

While a special finance auto loan may be convenient, it does has its pitfalls. The interest rates for this type of auto loan can range anywhere from 5 to 26% which is quite high and higher than what is charged by traditional banks. Another negative aspect associated with the typical special finance auto loan is the fact that the down payment required for this type of loan can range from 20 to 50%, which is also high.

Another thing that happens with the typical special finance auto loan is the fact some car dealers will inflate the prices of the cars they offer under this type of financing. This type of dishonest dealer will take a car worth $5000 and jack the price of it up to $10,000. The dealer will then require a down payment of 20% and finance the balance at 25%. The unfortunate buyer (who is often quite desperate) will then be tied into a contract with a very high interest rate on a car that is only worth half of what they paid. Plus, quite often this buyer will default on the loan which will ruin their credit even more. If the buyer is able to make the payments on the special finance auto loan they will have paid double the amount of what they would have had to pay for the same car purchased from an honest dealer at a fair price.

For the consumer with very poor credit, a special finance auto loan can seem like a God-send. A person will be able to borrow the money they need to buy a car. However, they will be paying a high rate of interest and will also have to pay a large down payment. The lenders offering this type of loan are making a whole lot of money, lending money to people with poor and bad credit, and they seem to be appearing out of nowhere as more and more websites are being added to the Internet daily.