Some commercial investors choosing to avoid the red tape involved with traditional financing and income raising ventures and are looking toward other types of funding including consulting with hard money lenders in NY. The basis of their concerns vary among investors but quite often is the result of restrictions imposed by traditional lenders regarding LTV (loan to value). This alone puts investors into a precarious position as they desire to put up as little capital as necessary in the acquisition of new commercial properties. When lenders set a lower LTV it means investors must either put up more money or their own or seek other sources of funding to make up the difference. There are various sources of funding for small businesses and other needing (or wanting) to avoid traditional financing routes.
Capital Foundations
Capital foundations are an excellent choice for businesses that need capital but are unable to secure traditional bank loans. Their original purpose was to cater to the unique needs of business borrowers but since that time they have evolved into an entity that is able to structure loans for almost any need a business might have. The funds these foundations provide help businesses with startup funds, acquisitions, working capital and sometimes even restructuring their debt. The problem investors may find with these foundations is the high cost of the loans. Because they assume a substantial amount of risk in their lending, there may be substantial fees, high interest rates and the need for personal guarantees. In addition some foundations may require a stake in the business and thus work as a silent partner or enter into an equity-sharing contract.
Personal Investments
Capital foundations are not the answer for all investors and many entrepreneurs make the decision to invest more of their own funds before they to other sources for help. While the use of personal funds is more likely to place the business owner at risk, it is not anywhere near the cost of high-fee loans and fees involved with capital foundations. Many traditional lenders will not even look at an investor until he has invested a substantial amount of his personal funds which leads entrepreneurs to seek out other sources of funding that may include the following:
Maxing out credit cards or home equity lines of credit
Acquiring a second job
Cashing in 401K or other savings plans
Loans from family members
Consulting New Jersey hard money lenders
Substantial reduction of liquid assets and securities
Peer-to-Peer Lending
Small businesses that do not qualify for loans from banks or hard money lenders might seek a peer-to-peer loan. These types of loans involve the presentation of the loan request to a large group of potential investors. The investors review the request and determine if they are willing to invest any of their own money to meet the needs of the business. This method minimizes the risk to any one investor and allows private investors to approve and fund loans to business that do not qualify for other types of loans.