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Financing difficulties and hard money loans

On Behalf of | Sep 8, 2016 | Real Estate Law |

Commercial real estate investors in Ohio likely understand that determining whether or not it is worthwhile to pursue a particular project may largely depend on the financing. In some cases, financing may be difficult and at a critical point, leading developers and investors to turn to an alternative called hard money loans.

Hard money loans are different from traditional loans in several important ways. Instead of banks, private financing groups often provide these loans. They are considered to be high-risk, which means that they often have extremely high interest rates and require large amounts of money upfront. The term of a hard money loan is very short, often lasting only one to three years.

While the availability of a hard money loan might allow developers to get past the initial financing hurdle, it is important for them to immediately start looking for ways to refinance the loan with a more traditional lender. Hard money loans are really just meant to provide a quick infusion of cash rather than being the only funding source for the project.

Developers who are encountering financial difficulties with obtaining funding for their projects might want to consult with real estate attorneys. An attorney may be aware of alternative funding sources in lieu of hard money loans. If there is no other option, the attorney may help clients with finding the hard-money loan that will provide them with the lowest upfront costs and lower interest rates. Counsel may also help them with finding other sources in order to secure refinancing of the loan when the term is up.