What is a Value Based Loan?

In real estate financing, a value-based loan is a non-bankable loan on an investment property, single-family home, commercial or multifamily building. In some circles, the term “hard money” is used to describe these types of loans. Hard money loans are often associated with “no-doc", private loans, and bridge loans. The term hard money is not a fair representation for this type of lending. In our opinion, the concept of hard money gives the wrong impression when used in lending circles.

We prefer to use the term value based lending. In our value-based lending model, underwriting decisions are based on the value of the borrower's hard assets—the commercial or investment real estate used as collateral for the transaction. Our value based loans are processed and closed quickly.

How is a value-based loan different from a traditional loan?

A value-based loan is an excellent tool for the right borrower in the right situation. In some cases, it is the only viable financing option. Traditional loans offered by banks, credit unions, and mortgage companies have complex underwriting standards with little or no flexibility to deviate from the guidelines.

With a traditional lender, your credit score, income, and earning ability are heavily weighted. Simply stated, a private lender has the ability to approve loans that are unique and that do not conform to traditional underwriting guidelines.

The traditional lender requires substantially more documentation to provide them comfort in the loan they are about to make to you. 

The loan process is much quicker. A funding estimate and preliminary approval may be obtained within a day or two.

Many borrowers take advantage of  fast underwriting and quick closings to negotiate more favorable terms from the seller due to quick closings.