When looking to fund a commercial project, bank loans are a slow and painful process. This is why many people turn to private lenders instead. The loans are approved much more quickly, they’re willing to take on riskier projects due to the asset-based lending format, and you get to build a working relationship with your lender to make future dealings much faster.
However, finding a private lender isn’t as simple as contacting your local bank. In order to help you find the right private lender, we’ve put together five qualities that you should be looking out for when you want to find the right private lender for your needs.
1. The lender offers you flexibility
If a lender is not willing to negotiate the terms of your hard money loan, then they’re likely not someone you want to deal with. Private money loans are known for being flexible with repayment terms, collateral and generally any variable that could be changed. Without this flexibility, it’s not much different to a regular loan from a bank.
2. The lender is willing to communicate
Private lenders should be treated differently than your regular bank lender. They should be far more responsive to your questions and concerns and they should be able to provide you with detailed answers to any concerns that you might have. Some lenders also make great advisors because they have experience working with commercial clients, so don’t neglect the importance of a lender that is willing to communicate.
3. The lender has a good reputation
If you’ve been recommended to a private lender by a friend or mentor, then it’s already a good sign that they have a good reputation. However, it’s never a bad idea to ask around in order to verify that the lender you’ve picked is a good choice. Reputation is important when it comes to large sums of money.
4. The lender has competitive interest rates
It should be clear that one of the minor problems with private lenders is that their interests are usually a little higher in order to compensate for the shorter loan terms. However, you can still find competitive interest rates with private lenders, and it’s a good idea to be in contact with several lenders so you can compare their rates.