One of the recurring themes on this blog is how self-employed homeowners leverage a hard money second mortgage rather than pursue business bank loans to invest and expand their businesses. We have these conversations on a weekly basis with prospective clients who need additional funds to take their business to the next level. Most of the people have a pretty clear idea of what they’ll do with the cash-out funds and how that will turn into new revenue for their business.
That was the case on this hard money second mortgage in Malibu. The owner had a relatively new business that was less than two years old that was doing really well but needed additional funds to get to the next level. With less than two years of operations, the commercial banks they spoke to wouldn’t issue a business line of credit for expansion.
And since they had been self-employed less than two years, those same commercial banks also wouldn’t issue a second mortgage or a home equity line of credit (HELOC) against their primary residence. Banks typically want two years of self-employment before they extend residential mortgage credit.
That’s where hard money lending comes in. These loans are equity-based so the borrower’s financials won’t be as heavily scrutinized in the same way they would be at a bank. Granted, we still look through the bank statements and cash flow. But, it’s just not as rigorous. For these homeowners, the financing worked out pretty well as it provided the money quickly so that they could embark on the expansion of their business.
Hard Money Second Mortgage Terms:
- $350,000 Loan Amount
- 12.00% Interest-Only
- $3,500/Month Payment
- 24-Month Term