There are many different types of hard money loans, but three that are the main and most often used.
With the many different clients and the many different needs that come looking for hard money loans, there are still three main loans that are used more than any others.
- • Bridge Loans
- Credit Enhancement
1) Bridge Loans
A Types of Hard Money Loans is a loan that is used for a short period of time until permanent financing is put together for the client. Bridge loans are a perfect solution for business opportunities because they allow the purchaser or investor to act quickly.
These loans can be used for buy-outs, foreclosures, cash out and construction purposes. Types of properties are:
- Income producing property
- Office buildings
- Office complexes
- Golf courses
- …and almost all commercial businesses.
This is the most common loan that businesses choose to take out in order to expand their business to the best of their ability.
2) Credit Enhancement Loans
A Credit Enhancement loan is one that many clients use to help get them out of debt and on the right track to a good credit standing again.
These clients are generally considered to be high risk because of their obvious lack of good credit standing, however on average most of these clients work very hard to pay back these loans as their main goal is to achieve good credit.
2) Mezzanine Loans
A Mezzanine Loan is a loan that is subordinate to a Primary Lender. It involves debt, which is paid back at the time of sale or refinance with an equity ownership piece given to the lender as a kicker or sweetener such as real estate or homes.
These are loans which lenders typically categorize as a 2nd-lien versus the preferred 1st-lien. This means that the lender is not the first person to get paid back when the borrower gets the money because the goal is to get out of debt with their previous clients, so the hard money lender may be paid last. This is a risk that the lender is willing to take as long as the client has the proper collateral.
With these 3 main types of hard money lending, the hard money lending business will continue to grow in the many years to come. There will always be someone in need of anyone of these loans.