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8 Best Alternative Business Loans in 2020

The 2020 financial year has been tricky for most small businesses. With a global pandemic forcing many organizations to close, or create new practices to keep their staff safe, this year has been a big challenge. As a result, there are a lot of companies that will be looking for loans and additional funding to help them recover.

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House Flipping Loans

When done right, house flipping can generate a profitable and worthwhile profit for the individuals in practice. Though the act of buying, flipping, and reselling properties can be an incredibly lucrative investment for many, there are still enough costs in flipping a house that is often more expensive than just buying a house to live in.

Consider that flipping a house means that you will have to pay to become the property owner for the back utilities and property taxes plus the purchase price of the property and closing costs. All of those costs come before you even start considering the costs of actually renovating the home. Additionally, there are taxes you need to remember, such as capital gain taxes.

All of these costs add up quickly, and getting a loan can be hard as a new/inexperienced house flipper. This is because there is a higher risk to the loaner when the goal is to flip and resell the house than to just buy and live in the home. For an inexperienced house flipper, this means that they may charge you a higher interest on your loan because you don’t have the track record of success that more experienced and established house flippers have. As such, some lenders may even choose not to work with/lend to inexperienced house-flippers.

However, this doesn’t mean that new/prospective house-flippers are entirely out of luck.

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Florida Fix and Flip Lender

Purchasing rundown properties, fixing them up, and flipping them for profit is a great business model. However, this can often pose a problem for many flippers. How to get the financing required to purchase and flip the property? To do this, many people turn to an alternative business funding lender, such as the South Florida Funding Group. By turning to one of these lenders, you’ll be able to apply for fix and flip funding, this will make it easier to invest in residential properties. Let’s look at what these loans are, how they work, and whether they can benefit you.

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Private Business Loans For Real Estate

Sometimes traditional banks don’t offer the private business loan solutions that you need for your business. In those cases, you need to find private money lenders that are going to help you find the non-bank capital funding or other funding solutions that your business needs. It’s easy to get frustrated when your business needs money, but by finding alternative funding solutions you can get your business the help that it needs to succeed. This article will help you better understand private business loans.

Private Real Estate Loans

One major business where you may need help getting loans is if you are in real estate. Finding hard money lenders can give you an excellent solution when it comes to getting the loans that you need for your real estate business. This section will take a look at the different hard money lending options if you are in the real estate industry.

Commercial Bridge Loans For Real Estate

Commercial bridge loans can be used for different industries, but these are most commonly used for real estate. These loans are a short-term loan that are used by businesses as they look for a long-term lending solution that will work for their business. One of the reasons why this is so popular for real estate is because it allows people to take advantage of great deals on real estate while they wait for additional funding to come in. These loans are also excellent for acquiring a business, paying for renovations, and large purchases that you may need for your business such as equipment.

These are short-term solutions for cash flow problems that you may be dealing with, especially in real estate. You should know that these types of loans do come with a much higher interest rate than other options as a result of them being so short-term.

Fix and Flip Loans

These are other types of short-term loan solutions for real estate investors. This type of loan helps the investors purchase and then improve the property, which allows them to resell it to make a profit. The renovations can be minor improvements around the property or major reconstructions. Fix and flip loans are only able to be used for residential properties. Generally, the real estate investor will use the money to purchase short-sale or foreclosed homes, then use the money to resell the property.

Fix and flip loans can be used for the following:

  • With fix and flip loans, the borrower is able to purchase property so that they can fix it up and resell it for a profit.
  • You can use the money for renovation costs, allowing you to sell the property for a nice profit.
  • You can use the fix and flip loans to do a complete reconstruction for your property.

You can actually get quite a few advantages when you take this approach. First of all, this is a secured loan that uses the property as collateral. This means you may get more favorable terms. These are also short-term loans that don’t usually have repayment penalties.

Residential Rehab Loans

These loans are exactly what they sound like: they are loans to help real estate investors to purchase and improve any residential properties. This is a highly competitive industry, one that you can easily be left behind in if you don’t get the quick and easy funding solutions that you need for your real estate investment. When you get a hard money solution like residential rehab loans, you are able to get your money quickly so that you don’t miss out on an amazing investment opportunity. Traditional loan options don’t work as fast as these hard money lenders do for residential rehab loans.

Cash-Out Refinance

Cash-out refinancing is a type of loan that replaces your existing mortgage with a new loan that will be more than your old mortgage. It offers you the difference in cash, which you can use to spend on improvements. This can be used by homeowners, but it’s also an approach that real estate investors also utilize. There are several advantages to this approach, such as getting lower interest rates than you may have with other options.

The biggest disadvantage with this type of loan is that you are at a risk for foreclosure. You are using your property as collateral, so if you fail to make your payments you will lose the property.

Options for Private Business Loans

For other types of businesses, there are different private lending options that you can consider for your specific needs. Every business is different, which is why you should carefully think about what your needs are. This will allow you to have an easier time when selecting the business lending solution that you really need to succeed. This section will take a look at these other types of lenders so that you can make an informed decision as to which solution is the best one for you.

Private Term Lender

If you go with this option, you are choosing something that is more closely related to a traditional bank. They offer short-term loan solutions, which typically are similar to what you would find with commercial loans. The specific terms of these loans are somewhere between 1 and 5 years, but this can depend on the lender and loan that you are trying to get. But, with this option, you are getting interest rates that are more in line of what you would expect from a traditional lender or bank.

Private Provider for Line of Credit

Another option is a line of credit. Line of credit is great because you only need to pay off the amount that you borrow and because you can continue to borrow any money that is left on your line of credit. Once you pay everything off, you keep this loan until you need it again. This is why this is such an appealing option for many businesses. In many situations, there is collateral required for this type of private business loan. The collateral that is often used here is the accounts receivable for your business.

Private Lending Working Capital

Working capital is another popular solution for businesses. During slow times or a period of struggles, getting working capital to help you overcome these difficult times can make a huge difference in the success of your business. Small businesses can find multiple lenders that can help you get the working capital that you need. It’s important to know that these do often come at a higher expense, so you should make sure that it’s worth it to get a working capital loan.

Cash Advance Consolidation

In periods of cash flow problems, an option like merchant cash advances can be an excellent solution. If you accept credit card payments, this can be a good option to consider when you are really in need of a solution for working capital or to consolidate debt. The merchant will offer you the money that you need for your business but then will take a portion of your credit card sales to pay back the loan. This can be a good option because you don’t have to focus on whether or not you make your payments on time as they are automatically taken from the payments. It will also only take a specific portion of the sales, which allows you to keep the money to pay your bills and earn a profit.

Future Accounts Receivable Financing

This type of funding means that you are selling future business to the private lender so that you can get the cash that you need. This isn’t really a loan. You are selling off future income in order to get cash. Since this isn’t a regulated lending solution, there are a lot of risks to it which means that you will end up paying higher interest rates.

Invoice Factoring

Again, invoice factoring isn’t actually a loan. What you are actually doing is selling your invoices to an invoice factoring company. The factoring company will then take the invoice and collect the debt, in which they will get paid. This is a good option if you have a cash shortfall that you need to resolve right away. For example, say you sell goods to a business and they owe you $20,000. However, due to a shortfall, you need that money sooner than your client can pay you. The amount of money you get when selling the invoice will depend on the factoring fee that is charged by the company.

Equipment Financing

Does your business need new equipment because yours have broken or just don’t meet the needs of your business anymore? This happens regularly in businesses, which is why you need to find the best solutions for financing this equipment especially if you don’t have the money on hand to purchase it now. Equipment financing can be the best solution. You can choose to lease the equipment, which gives you the benefit of upgrading more often but you don’t retain ownership of the equipment. This means that you can’t count it as an asset for your business. However, if you purchase it with this financing, you do own the equipment and it is considered an asset for your business.

Understanding Private Business Lending

Private business lending is a solution that takes over when traditional banks can’t offer the best solutions. Since traditional lenders have to deal with more stringent regulations, they don’t really have a lot of flexibility when it comes to the solutions that they can offer clients. Private lenders have the flexibility to be more creative when it comes to financial solutions for their clients. If you have not found much luck finding funding going the traditional route, you may find that private lenders have the solutions that you are looking for.

There are some benefits and downsides that you need to consider when deciding whether or not private lenders are the best option for your business needs.

Benefits of Private Business Lending

The first thing to take a look at is the benefit of going through a private lender. The biggest benefit is how easily you can access the capital that you need for your business. You get higher approval rates with private lenders, meaning that you are more likely to get the money that you need. It’s also extremely easy. You may not always have to provide several documents for the process, and you get an answer within a few days.

You will also get more flexibility when it comes to how you can use the money that you get. Traditional loans will typically have strict requirements for what you can use the money for. The upside of alternative funding is that they don’t have these strict requirements to contend with, which allows you to get the perfect funding solutions for you.

A final benefit to consider is that with traditional banks, you do need to have excellent credit if you are going to qualify for a loan. Generally, if your credit score is below 680 it can be very hard to get any type of loan for your business with the traditional route. Private lenders have a much lower threshold, often around a 500 credit score.

Downsides of Private Business Lending

The biggest and most important downside to going with private lending is that the funding is more expensive when compared to traditional banks. The funding company focuses on the risk of giving you the money, often giving money to the riskier clients. That’s why they have high-interest rates on their loans. Banks are able to offer lower interest rates because their lending is less risky to them.

Private Money Lenders vs. Traditional Banks

When it comes to borrowing money, your options are to go with a traditional bank lender or work with private money lenders. Some people prefer the more agreeable terms of the bank, but the problem with traditional banks is that it can be a very complicated process to go through for your loans. They are more regulated by state and federal governments, which does give you peace of mind that you are protected when getting your loans.

Private lenders are still regulated, but they have less strict standards that are required of them than traditional banks have to manage. Because of these less strict standards, private lenders are able to be more flexible in the loans that they offer and who they offer these loans to. This makes it easier for you to get loans from private lenders than traditional banks.

Here is a breakdown of the significant differences between private lenders and traditional banks.

Private Lenders

  • More expensive as a result to the higher interest rates.
  • Faster process of applying and getting your money.
  • Approval process is easier.
  • More flexibility because of less regulation
  • Loan options are more customizable.

Traditional Banks

  • Less expensive because of lower interest rates.
  • Slower to move through the process.
  • Approval process is more scrutinized, including details like a credit audit and financial history.
  • Has more government regulations, meaning that they offer less flexibility.
  • Strict regulations reduce the loan options.

PRIVATE BUSINESS LOANS FOR REAL ESTATE

Need help selecting the Best Hard Money Lender?

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786-544-2700


Selecting the Best Hard Money Lenders

After you understand your options for alternative funding, knowing where to get your hard money loans is beneficial to you. This section will take a look at tips so that you know that you are trusting the right lender for your needs.

Do Your Research

One of the best things that you can do for yourself when finding a hard money lender is to do your research. This approach to funding can be quite different from traditional lending solutions, so it’s a good idea to know what to expect if you’ve never worked with a hard money lender before. These can often be significant differences, so you should be sure that you are completely comfortable with them.

Look at Reviews

It’s very important that you find a lender that has a solid reputation in the industry. There are many scam companies within this industry, so you should do your research to see how positively the lender is reviewed before making them an option for your business. It’s also a good idea to ask for referrals, since talking to someone who worked with the lender before.

The Best Value

You shouldn’t go with a lender just because they have the lowest rates. You want to be sure that you select someone with value. You should be looking for things like a reputable company that offers transparency and professional guidance as well.

Trust Your Instincts

Your gut can be an exceptional guide whenever you make any decisions for your business. Trust your gut and you may find the best approach to funding when you do so.

Conclusion

Finding funding for your business can be difficult, especially in the real estate world. There is so much competition in this industry, it can be a long and complicated process that doesn’t even guarantee that you will get the funding that you are looking for. Through alternative funding options like hard money lenders, you are more likely to find a funding solution that will work for your specific needs.

How to Get Fix and Flip Business Line of Credit?

For first-time investors, you may be wondering what your options are to get money for the acquisitions and renovations of real estate properties that you want to fix and flip.

Whether you were inspired by your favorite house flipping renovation shows or you have a general interest in this as a business, you need to know how to get the necessary funding to be successful. It’s also important to know what you’re getting into when you are looking into flipping homes.

This guide will give you a brief look at the costs associated with flipping homes, as well as the different funding options that you can choose from.

NEED A FIX AND FLIP BUSINESS LINE OF CREDIT NOW?

CONTACT DREW AT SOUTH FLORIDA FUNDING GROUP

786-544-2700

Understanding the Costs of Flipping Homes

One of the most important things to understand before anything else is what costs go into flipping homes. It can be more expensive to fix and flip a home than it can be to actually purchase a home that you are living in. When you buy a home to fix it up, you not only have to pay the renovation costs, but you also have regular monthly costs that you need to pay until the flipped house is closed. This includes the mortgage, taxes, homeowner’s insurance, and utilities. You are on the hook for all of these added expenses until you close on your house, which means the goal should be to finish the project as quickly as possible to maximize your benefits.

You also have to consider the taxes when you sell the house. If you flip the house within a year of purchasing it, this will mean that short-term capital gains taxes will apply. You can expect to pay between 10% and 37% in short-term capital gains tax, depending on where you are on the federal tax bracket. This will significantly cut your profits.

It’s important to know that it can be harder to qualify for a traditional loan when you are purchasing a house to flip rather than the one you are going to live in. This is because flipping houses can be much riskier for the lender. This is especially true when you are an inexperienced flipper. If you have a few successful flips under your belt, you will have an easier time getting these loans.

Different Loan Options to Fix and Flip a House

What are fix and flip loans? These are loans where you can buy a house for the sole purpose of fixing and flipping. When you watch home improvement shows centered around flipping, you don’t usually see the behind-the-scenes look at the teams getting these loans to fund their new business venture.

Unsecured Fix and Flip Loan

Unsecured loans are a great option for fixing and flipping homes. This is because you get fast funding and don’t have to worry about putting up collateral for the loan. You do have to remember that with this type of lending option, you will end up paying much higher interest rates than you would if you had put up collateral. The good news is that in many cases, there are unsecured fix and flip lenders that work with repeat borrowers if they were successful in flipping their homes and paying back their debt.

Hard Money Loans

Another option is a hard money loan. These types of loans are very different from traditional loans, as they require you to get money from investors or other individuals. This is a private lending option, where there is no credit check to worry about. Hard money loans are secured loans, secured by an asset. In this case, the house that you are flipping would be the asset that you use as collateral. Another great thing about this loan option is that you can get your loan a lot quicker than if you work with a traditional lender.

In some cases, this can be the only option that first-time investors have when they want to start fixing and flipping homes.  

Crowdfunding

Crowdfunding sites can help you find a loan that can work for your needs, particularly when you find crowdfunding sites that specialize in fix and flip loans. If you have been struggling to find a lender that will give you the money that you need for your fix and flip project, you may find more success with crowdfunding.

Home Equity Loans / HELOCs

You can also consider using your own home as an asset to secure a loan. Using your home for a home equity loan or HELOC (Home Equity Line of Credit) can give you the money that you need to fund renovations for your fix and flip home. As long as you have equity in the property that you are living in and meet any other requirements that the lender may have, you can qualify for these loan options.

A home equity loan offers you a lump sum that you have to pay back over time. The HELOC allows you to use it as you would any other line of credit loan. You take what you need and only pay on what you use. You can keep borrowing from this amount until you can’t anymore.

Business Line of Credit

Just like a HELOC, you could also get a business line of credit. Again, this is a type of loan where you can have a credit limit of a specific amount (much like a credit card). Then, you can borrow from this amount as needed. You only have to pay interest and fees on the money that you have used from the line of credit. You can continue to use this until you have reached the credit limit on your line of credit.

Final Words

Short-term real estate investors do have a few different options to choose from when they are looking into getting fix and flip loans. You will likely find that taking the approach of unconventional lending better suits your needs. These are all options that you can consider for your next house flipping project.

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The business funding you need when others say No!.

2569 Bay Pointe Dr.
Weston FL 33327

Email:
drew@southfloridafundinggroup.com 

786-544-2700

DISCLAIMER

 The operator of this website is NOT a lender, does not make offers for loans, and does not broker online loans to lenders or lender partners. Customers who arrive at www.SouthFloridaFundingGroup.com are matched with a lender or a lender partner, who offer business loan products or credit repair services.