UNDERSTANDING SOME BASIC FACTS ABOUT PRIVATE MONEY can make all the difference between getting the money you need for business and real estate or not getting it. This is especially critical if you want to work as a financial broker or business loan broker.
BELOW YOU’LL FIND INFORMATION THAT CAN INCREASE YOUR CHANCES of getting private money funding.
WHAT MAKES A LOAN A PRIVATE MONEY LOAN?
Private lenders may be individuals, corporations, venture capital firms, limited partnerships, commercial finance companies or certain other types of business entities. Traditional institutional lenders like banks, trusts, pension funds, or credit unions are not private lenders, although some have units that deal with private money.
Private money loans are typically non-conventional commercial real estate loans secured by real estate. They are often called hard money loans. In addition, many commercial finance companies offer private money loans such as asset-based loans for business.
Hard money lenders make private money loans. Many private money lenders make hard money loans.
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IWS-211 : The IWS National Directory of Community Banks
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IWS-210 : The IWS Directory of Commercial Banks In the United States
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IWS-75 : The IWS Directory of U.S. Embassies, Consulates, and Diplomatic Missions Worldwide
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IWS-46 : The IWS Directory of Top Registered Equity Crowdfunding Platforms and Venture Capital Firms
THE TWO MAIN TYPES OF PRIVATE MONEY FUNDING
Private money lending consists of loans for business or real estate that must be paid back over time
Hard money loans are a common type of private money loan. They typically have less stringent eligibility requirements, shorter terms and higher interest rates than traditional bank loans.
Asset-based loans from commercial finance companies are another type of private money loan.
Investments in a business or real estate project do not have to be paid back.
Investments come from wealthy private individuals (“angels”) or groups such as venture capital (VC) firms. Investors may take part ownership of a business to earn a return on their investment as the business grows.
POTENTIAL ADVANTAGES OF PRIVATE MONEY
Private lenders are less bogged down by bank paperwork, government regulations, and institutional protocol.
Time from initial loan request to funding is faster.
Private money loans are more flexible. For example, private lenders and investors are more likely to offer funding to “high risk” business or real estate deals.
BORROWERS CAN USE PRIVATE MONEY LOANS for many business and real estate purposes, although lenders can restrict loans to specific uses. Common purposes of private money loans include:
- Rehabbing a property
- Acquiring bridge money
- Providing short-term operating capital
- Equipping an office or research facility
- Making a down payment on real estate
- Buying real property
PRIVATE INVESTORS
Business Angels are wealthy individuals who invest a portion of their money into real estate or a business in the hope of making a good return on their investments. These investors may come to the rescue of a new and promising business that finds it hard to obtain financing. They generally seek companies or projects that:
- Show great profit potential
- Will grow fast
- Are more than small “mom and pop” types of businesses
See the Financing page for more information on private money as well as the IW$ Kit on how to become a Financial Broker.
K-1 : The IWS Financial Broker/Finder/Business Broker/Business Consultant Kit
This unique and in-depth business success kit shows you how to start your own business as a financial broker/finder/business broker/consultant to find money and business assets for a variety of companies and individuals.