Asset-based lending is the way by which a real estate investor is able to obtain funding for investment properties. This kind of loan is dependent upon the liquidity of the borrower, as well as their rating of credit, however not on the amount they earn or their work background.
The process of obtaining an asset-based loan, a particular kind of bridge loan usually for 12-24 months intended for investments commercial and residential properties- is usually faster than dealing with banks that are institutional require less paperwork and will mean that you’ll be able to access cash faster to purchase additional properties and become a successful real estate business owner.
Asset based lending for real estate is a great option in the event that you’ve experienced an issue with credit or foreclosure and are struggling to get money from a traditional bank. It’s also a good option in cases of an increase in the rate of increase in your real estate investments and need money to keep the process going.
What is Asset Based Lending Work
In the case of asset-based lending, hard money lenders rely on the collateral that is usually a real property, to help you get additional cash to finance further real estate development projects. If your cash is tangled all in your real estate, it’s not liquid. If your business is growing rapidly and you are experiencing rapid growth, it is likely that you require additional cash to keep growing. Here is where the hard money lending comes into play..
Hard money lenders can put cash to you quicker than conventional financial institutions. The procedure requires less paperwork and allows for greater flexibility. In addition to the equity of your real estate investments A Hard money loan lender can also look at equipment, accounts receivables, and inventory in order to calculate the amount of your loan. Since the property itself isn’t liquid and you’re not borrowing against your own income, that is why the hard money lenders typically have a higher interest rate than traditional banks.
Qualifying for a real Asset-Based Real Estate Loan
The good thing is that asset-based lenders do not typically require an extensive application that requires pages upon pages of an individual’s financials. However, they require a thorough record of the property as well as the plan of the investor to manage the property. In determining the amount of loan and amount of interest rate, the bank must take into consideration the investment goal as well as the expected ROI, present and post-repair value of the property, as well as the plan of exit for the investor. The more precise documents and financials that the investor can provide on their investment and the better the chance that the lender will see this in the exact same manner but that’s not always the scenario.
Another benefit is that the process of applying and approving for an asset-based real estate loan can be much simpler and quicker than traditional real property financing. In many instances investors can get the loan approved and funded in just one to two weeks. With the majority of lenders that are asset-based investors must make the 5% down payment.
The Advantages from the Asset Based Lending
If you’re looking for the best way to finance a multi-family venture or you require commercial financing There are many advantages of obtaining asset-based financing
These loans typically are quicker than traditional loans and require less paperwork and documentation. Additionally, they close faster than a traditional mortgage, they come with less underwriting requirements and have greater interest rate.
The cash flow asset-based loans can help bridge the gap between expenses and cash receipts incoming to your company.
The loan funds are provided as you require it and aren’t dependent on a specific goal like the purchase of equipment.