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What is a Hard Money Loan?

florida-timberland-loanA customer called AgAmerica Lending not long ago with a problem. He was coming close to a foreclosure on a tract of timberland. He wanted to sell off the tract, but not under distress in a fire sale, where he might lose his shirt.

Our loan specialists had the plan to buy him some time: a hard money loan. Instead of losing the property, he had time to put it up for sale, wait for the right buyer, and was able to walk away with a profit. He was elated, not only because he retained the equity built up in the land, but also because his credit was not ruined. We were proud that he was able to get out from underneath a bad loan – and we were happy to help him stand tall in a tough situation.

Hard money lending, or private lending, is often misunderstood. Put simply, a hard money loan is an asset-based loan. Some people wrongfully believe that hard money borrowers are in financial trouble when actually these types of loans were the original way to borrow money. In the 19th century, it was near impossible for a lender to verify a borrower’s income, so all mortgages were asset-based loans. Over the decades, as banks competed for business, lenders slowly began evaluating borrowers’ abilities to repay the debt according to their income, instead of just looking to the value of the collateral.

Nowadays, since institutional banks look more to a borrower’s ability to repay the loan and less to the asset itself, hard money lenders have a place again in the market. Hard money lenders like AgAmerica Lending are there to help not just those in financial trouble, but any borrower who has enough equity in an asset. Hard money borrowers are often stable, successful business people that just happen to find themselves with a need not met by a traditional bank loan.

Some of our borrowers are in need of a short-term loan, say a few weeks or six months, to “bridge” them over to a new project or goal. Others are behind in their current payments and need a “loan buyout” from an institutional bank. We’ll often take over their loan and restructure the payments to more manageable levels. 

Our entire team at AgAmerica Lending is knowledgeable and experienced in real estate valuation. Due to this experience, loan underwriting and property appraisal are completed in a timely fashion. Depending upon the type of loan, funding can take as little as one to three weeks. If you think a hard money loan could work for you, contact our team today.

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