Not long ago, you had to knock on a bank’s door when you needed money to finance your business ventures.
Borrowing from a bank was one of the only ways to get money. But in the last decade, a slew of alternative lenders have surfaced, challenging the traditional lending system. There are now hundreds of reliable lenders who can help you get a loan in as little as a day.
Here’s why traditional lending and banks are no longer a popular mode of lending among the majority of the borrowers.
They Take Ages to Approve and Fund Your Applications
The speed with which a loan is granted and funded is one of the deciding factors for borrowers. It can take banks several days to approve your application which can be disadvantageous for real estate investors who are looking for funding as soon as possible.
On the other hand, a hard money lender can get you funding in around 3-5 days, much faster than the 30-plus days it takes a bank to fund your loan after approval.
There have A Never-Ending List Of Requirements for Approval
Compared to hard money lenders, bank loans impose higher restrictions on loan approvals. A loan with more restrictions has a higher chance of being rejected.
Banks have a comprehensive list of standards that you must follow to be considered for financing, which increases the likelihood of your loan being denied.
Each year, the list of requirements becomes more extended, making loan applications even more challenging to navigate. Recent foreclosures, short sales, loan modifications, bankruptcies, and bad credit ratings cause banks to be concerned and refuse to lend you money.
On the other hand, a private lender has no such restrictions, making loan approval hassle-free.
They Rarely Accept Loan Applications
You may be ineligible to apply for a bank loan for several reasons. Maybe there are issues with property’s water and electrical systems or its foundation, causing the bank to rule the property unfit for financing.
Banks are risk-averse lenders who will reject your loan application if there are even minor inconsistencies. If you don’t fulfill their stringent lending conditions, your application will be refused right away.
It’s Possible That You Won’t Get the Entire Loan Amount
If your loan gets approved by the bank, there’s still a risk you won’t get the entire amount you requested. A bank can decide that you might not need that much money for your project or that lending you the full amount is too risky.
As a result, you may want to create an alternate strategy if you only receive a percentage of the funds you had requested.
If you’ve been rejected a loan by banks or any other financial institution, Commercial Private Equity can help you out.
Contact us for more information about our financing options.