What is a Private Business Loan?
The Definition: A private business loan is any business financing provided by a non-bank or traditional business lending source. A private business loan comes from lenders that use all types of both personal and/or business collateral to secure their lending, including, but not limited to, business assets, personal assets, both personal and commercial real estate to secure their business lending interests. Private money lenders don’t typically require giving away a portion of your company’s equity in order to obtain financing.
As a small business owner, you are probably aware of various traditional business loan products like Bank business lines of credit and Small Business Administration (SBA) loans. You probably have also discovered some alternative business funding products as well, like short term business loans, invoice factoring, equipment leases or loans, as well as business and merchant cash advance. But, beneath all these common business financing products lies private money lenders — who are lending cash through loans to help small business owners. A private money lender has a lot of flexibility and attractive terms, however, they can be difficult to find.
AdvancePoint Capital can provide private money to business owners that need it the most. As a private money lender, we’re here to offer alternative solutions to financing.
What about those lending hard money? Well, a hard money lender may also invest private money to assist with financing a borrower. These lenders are hard money lenders that utilize assets, typically real estate, to secure loans. These are also considered a non-institutional private money lender or lenders that far outnumber more traditional sources. Real estate investors are primarily interested in a “fix and flip” model and will look for creative ways to get the funding they need.
The Truth About Private Business Loans
When looking online by doing a Google search, you will find many sources that will tell you a lot of products that are actually traditional or alternative somehow are private business loans just because they are not provided by an FDIC Bank or Credit Union. The bottom line is that it is just not true.
In the last ten years, with the advent of the financial technology revolution, a lot of well-established, and well-funded I might add, private and public companies have been successfully providing business loans to real estate investors and other small business owners. If not, we are a private lender and would be glad to assist you in learning about private lending and how it may be able to help you. As a private money lender, we’re able to take a different approach to offer capital.
Since business lending is not regulated as much as the consumer end, hard money loans are initiated by individuals and small financial collectives or “family offices” that will take on greater risk than banks, credit unions, or alternative business lenders. These private money lenders have their own set of rules that usually entail short term loans with higher costs than that of traditional business lending and secure both personal and business collateral.
Hard lending money is very popular with the property investor industry because they can use the collateral of real estate to secure hard money, which they love. This can serve as a type of private money lender experience, as it’s coming from a private lending source. An investment property has a ton of value. It’s a hard asset that offers some real security against the money they are lending. For those looking for an alternative route, hard money lenders offer a sound solution through investment property and other hard money solutions.
How Does Hard Money Lending Work?
Business owners can discover hard money loans through alternative online lenders such as AdvancePoint Capital. Unlike traditional business loans, hard money loans are asset-based — which means that the asset acts a the collateral and will back the money loans, mitigating some risk. Typically, real estate investors will use commercial real estate as collateral for loans, and a hard money lender will provide financing that can then be used for a variety of purposes. For instance, real estate investors can use these loans to fix and flip housing, develop a rental property, or secure additional estate properties for commercial purposes.
This real estate provides a security measure to hard money lenders that provide loans. A hard money lender is almost entirely focused on the real estate itself, which means that borrowers may find far more hard money lenders available than other business loans and financing options.
What Kind of Terms Should Be Expected for a Private Business Loan?
Rates: Rates will vary greatly from private lender to private lender. Usually the principal & interest rates the same as credit cards
Terms: 1 month to 12 months with the potential of extensions
Fees: 1% to 5% Origination Fees
Payments: Monthly, Bi-weekly and in some case daily Monday through Friday
Credit Standards: All types of credit considered from Poor to Excellent
Turnaround Time: Same day, a week or in some cases up to a month
Documentation: Full Documentation will be required of both personal and business financials
What Are the Most Common Uses for Private Business Loans?
- Cash Flow to stabilize business bank account
- Emergency Payroll issues
- Fix and Flip
- Emergency Cash infusions due to extenuating circumstances
- Emergency relief for accounts receivable issues
- Repairs of existing facilities
- Equipment Breakdowns
- Inventory or supplies
- Business Expansion
- Commercial or Residential property acquisition
The Benefits of a Private Business Loans
- Offers business funding when traditional or alternative business funding sources do not
- More Flexible and creative loan structure than traditional business lending
- Allows a small business to take advantage of unique business opportunities when other business funding sources
- Give property investors the ability to fix and flip without worrying about funding sources
The Disadvantages of Private Business Loans
- Costs and terms are more expensive than traditional or alternative business funding
- The financial stability of the private company providing your funds
- Customer support and technology like online customer access may become available or sophisticated as
- larger business lenders.
The fast, convenient and straightforward way to get the money you need for your business – now! Get Your Quote Today by filling out our simple form.
Frequently Asked Questions
Are Private Business Loans difficult to obtain?
The short answer is yes. Finding private business lending sources can be difficult. Private lenders don’t market themselves like traditional or well establish alternative business lenders. Private business lenders are also extremely selective and use non-traditional methods to approve business owners. Private business lenders can also be specific industry business lenders, meaning they have specific and narrow industries they will lend to.
Can I qualify for a Private Business Loan if I have bad credit?
Yes, you can get approved for business financing with bad credit. Your options may be limited, and the rates, costs, and terms may be affected by how bad your credit is. However, for those with bad credit looking to fix and flip properties, this may be the only option. Also, collateral will be key to your ability to get a private business loan if you have bad personal credit.
Can I Get a Private Business Loan with No-Docs?
The short answer is no. Due to the greater risks of private business loans, you will be required, at the minimum at least a reduced amount of documentation, such as bank statements.
Can I get a Private Business Loan if I am a start-up business?
The short answer is maybe. Typically you cannot get a start-up business loan without showing a history of revenue and your ability to manage cash flow. Former business ownership experience in prior businesses will probably be a must. For real estate investors in the startup marketplace, fix and flip operations may be difficult to obtain financing for without some history of success.
The Bottom Line: Advice, Tips, Warning’s about Private Business Loans
Like any business financing, you must still ask the question of why you need business financing. Is the need for business capital a short term problem? Was this a one- time special circumstance emergency, or will you need working capital long term?
Always make a cost verse benefit approach when thinking of private business loans. You are not only putting your business on the line but also personal assets sometimes, so you need to think things through carefully.
If you are going to consider a private business loan, take the extra effort to investigate the Private Business Lender as you are not dealing with a nationally known brand like Chase or Bank of America. Ask for references and ask those references to how their experience was. Was the private lender easily accessible? Was the private lender flexible when any unexpected issues arose, and how was it handled? Is the Private Business Lender customer-focused?
How to Apply for a Business Loan?
We at AdvancePoint Capital can assist you in finding the many different hard money solutions that you may need. We offer an easy business loan experience that our customers love, that is a fast, streamlined process and high approval rates that come from working with us as your hard money lender.
Applying for a hard money loan with AdvancePoint Capital is as simple as a 1, 2, 3, 4 process. Start with this online form, then fill out the short application page, wait a few hours for your approval, and then get your money!
The fast, convenient and straightforward way to get the money you need for your business – now!
Get your Quote Today by filling out our simple form.