One of the selling points hard money lenders like to promote is speed. A typical hard money loan can be approved and funded in less time than it takes to get bank funding. How much less? That depends on a number of factors. Every money loan is different. But the one thing you can take to the bank, so to speak, is that hard money lenders work quickly.
Actium Partners is a Salt Lake City hard money firm that has been known to approve and fund loans in less than 24 hours. That is certainly not the norm but working that quickly is possible when circumstances warrant. It is all based on how hard money loans are structured.
The place to start in explaining all of this is to say that hard money loans are loans made against hard assets. If you were to apply with Actium for a loan to purchase a strip mall, the firm would not be all that interested in your income, credit history, and debt load. They would be interested in the value of that strip mall.
Loan approval would be based on how much the property is worth versus how much you are asking to borrow. If you wanted to borrow $1 million against a property worth $10 million, you probably wouldn’t have any difficulty getting approved. As for how quickly that loan could be funded, it depends on circumstances.
There isn’t just one thing that determines how quickly a hard money loan can be approved and funded. A number of circumstances play into the timing. But when all is said and done, most hard money loans close within a matter of days. You do not get that kind of speed with a bank or credit union. Traditional lending institutions normally take months to close on sizable commercial loans.
That said, here are three things that affect hard money timing:
Despite the fact that hard money lenders have very minimal documentation requirements, they still need some documentation. The speed at which said documentation is provided affects how quickly a loan can be approved. Perhaps this is why hard money lenders advise new clients to have all of their paperwork together before they apply. Lenders tend to move very quickly once a loan application and supporting documentation have been submitted.
Because hard money lending is based on hard assets, the location of the asset plays a role. Let us go back to the previous example of obtaining a strip mall. If the strip mall is located in the same town as your lender, the chances are pretty high that the lender can appraise it within 24 hours or so. But if it is located in another state, it may take a day or two for the lender to arrange an appraisal.
Speaking of appraisals, some hard money lenders have their own appraisers on staff. They make enough loans that employing an appraiser is in their best interests because it speeds things up. If a lender needs to contract with a third-party appraiser though, scheduling could be a problem. Appraiser availability can slow things down.
These are the three biggest things that affect hard money timing. In most cases, loans can be funded within a day or two of approval. Closing within four or five days is pretty normal for hard money. But when circumstances warrant, a hard money lender can work quickly enough to get approval and funding done within 24 hours.