Hard Money Question

7 Replies

So I was speaking to a provider about SBA loan options for a small business i am starting. Its not real estate. He suggested I look at a hard money loan from a provider that he just started working with and the deal sounded almost too good to be true, but he sent over some paper work and its all in the contracts. But I am a bit concerned about the fee being paid to him which I think is high, but he says those numbers are non negotiable.

Servicing - 1mil for 5years

Broker gets -10% - 100,000

Referring party - 2pt -20k

Bank - 1% upfront to start the loan servicing.

The reason I am looking at this option is that it allows for interest only payments of 1% to be paid annually instead of a monthly payment.

Looking for some opinions on this deal, is the broker fee too high? Did anyone hear of these types of deals before?

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Since I dont need all the money for the small business, the plan was to then use the excess for real estate flips, to help recoup that pay back money.  Thoughts?

Originally posted by @Stevens Demorcy :

Since I dont need all the money for the small business, the plan was to then use the excess for real estate flips, to help recoup that pay back money.  Thoughts?

 Depending on the business you are looking to start, it sounds like you are supplementing a risky business with a very risky business. And if the business is worth starting in the first place, shouldn't you not be distracted by flipping houses?

To clarify, the SBA broker is charging you 10 points? That sounds excessive.

You are correct, all business ventures come with some level of risk.  The house flipping is not going to be a primary business.  I know people who flip houses and would just invest on 1 or 2 properties per quarter with them.  I would just be an investor, and hopefully recouping my money back.

This isnt an SBA loan, its a hard money loan.

@Stevens Democracy What is the asset that the loan is based on? 

@Stevens Demorcy

Can you tell us more about the asset?

I do agree that if you got a business loan  (like SBA), it would be cheaper than hard money for flips, which could be around 12% and 3 pts for beginners.  However, it'll take time to get it, and they'll really vet your use for the money.

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