Acquiring commercial property often means obtaining considerable financing. Borrowers have options including traditional lenders and their hard money counterparts. One of the advantages of going the hard money route is working with a direct lender.
A direct lender is a lender that works directly with borrowers, without the need for third parties or intermediaries of any kind. There are no brokers involved. There are not multiple layers of underwriters, loan officers, etc. In many cases, borrowers work directly with lending firm owners.
Eliminating all the intermediaries makes for an interesting arrangement between lender and borrower. Incidentally, direct lending is a hallmark of the hard money industry. Firms like Salt Lake City’s Actium Partners keep things direct, simple, and easy.
Direct Lending Is Fast
As for why borrowers should work with direct lenders on commercial property acquisitions, let us start with speed. Simply put, direct lending is fast. Direct lenders operating as hard money firms are not required to follow the same rules and regulations that pertain to banks. This allows for a much more streamlined approval and underwriting process.
It is not uncommon for a firm like Actium Partners to give full approval on the same day a loan is applied for. It’s also not uncommon to fund a hard money loan in a matter of days. But even if approval and funding take a week, it is still considerably shorter than the amount of time traditional lenders usually need.
Documentation Requirements Are Minimal
A more streamlined underwriting process manifests itself in a number of ways, including minimal documentation requirements. Traditional lenders require all sorts of things. They want to see:
- Proof of income
- Credit reports
- Tax records
- Balance sheets
- Profit and loss statements.
Direct lenders operating in the hard money space need very little documentation pertaining to a borrower’s creditworthiness. Documentation requirements tend to be limited to information on the property being obtained. If a borrower furnishes all the information upfront, the likelihood of getting future document requests is slim.
Loans Are Highly Customizable
Because direct lenders lend from their own financial resources, they have the ability to be more flexible than traditional lenders. This allows for a great deal of customization for each loan. Everything from repayment structure to terms to fees and interest rates can be customized on a case-by-case basis.
The ability to customize makes direct lenders more adaptable. In other words, they are flexible enough to work with borrowers in unique situations. They can help investors with diverse portfolios and even foreign nationals looking to obtain property in this country.
Borrowers Get Personalized Service
The icing on the cake is the personalized service direct lenders are known for. This plays out in a number of different ways:
- Direct Access – Borrowers have direct access to decision makers. Communication is also more direct, leading to fewer misunderstandings and assumptions. It all makes for a smoother transaction.
- Better Relationships – Direct lenders are known for building strong relationships with borrowers. The goal is to provide a level of service that keeps a borrower coming back for every new funding need.
Personalized service has a habit of creating loyalty between lender and borrower. Over the long term, such loyalty can work to a borrower’s advantage. For example, a hard money lender will bend over backwards to help a loyal repeat borrower in a difficult situation.
There are definite advantages that come with direct lending. When traditional lending just will not do, a direct lender operating as a hard money lender could be the ticket. Direct lending offers speed, streamlined underwriting, personalized service, customization, and a lot more.
