In a perfect world, if we had a great idea for way to make a handsome profit and grow wealth, we’d already have the cash in hand necessary to just throw at that project and let things develop naturally. However, even people fortunate enough to have a lot money available to them often don’t have the huge financial resources required for bigger projects, such as construction, or rehabilitating a building to make it ready for reuse again.

In instances like this, that’s when loans are required. And while the banking system has centuries of established rules and regulations that make getting a loan relatively straightforward, that doesn’t mean that getting a loan is easy. This is one of those areas where a hard money loan can step in and make a big difference to the success or failure of a project, but why go this way, rather than just sticking with a traditional banking solution?

Slow Results, Low Risks

Banks are in the business of keeping money secure, which is no surprise since this is where most people put their money for safekeeping. However, that also means that banks are much more conservative and risk averse when it comes to approving loans for ambitious projects. They want to ensure the lowest risk for maximum return, and this often means that their qualifying requirements, evaluation and approval process and amounts they are willing to loan may not be compatible with your needs. This is especially true if you have an opportunity that others are aware of, and you need to act fast before someone else moves in. In cases like this, it’s often those centuries of rules and regulations that make banks so safe, that can complicate matters and slow down the progress on a project where timing is often critical.

With larger banks there are a number of hoops that need to be jumped through, and often a considerable period of time while the loan request is being considered. At the end of it all, the amount of risk that may be involved in a project may still be too great, despite you having met every request the bank has asked for. There are many factors that the bank takes into account, including your own financial situation.

Hard Money Loans For Higher Returns

Hard money loans have higher interest rates than a traditional banking loan. But they also offer a much faster approval rate, and, perhaps more critically, they are aimed at people who are thinking about the future. Like you yourself, a hard money loan approval is based on a valuation of what the project will ultimately yield in profit, not what your current financial situation is.

If you have a property project in mind where you know that timing is critical and you want to act quickly, a hard money loan may be the perfect way to get started. Banks are, and always will be important loan institutions. But a hard money loan can always lead back to the bank once they realize you’re already profitable.