If I had to come up with one word describing the biggest difference between traditional financing and hard money lending it would be ‘speed’. There are a number of reasons certain types of borrowers make hard money their first choice. But at the top of the list is the speed with which hard money lenders do business.

Take Actium Partners out of Salt Lake City, UT. I can tell you a lot of stories, but here is one I appreciate in particular:

Actium received a loan request from a panicked investor whose bank had backed out of a previously agreed loan. He was trying to buy a multi-unit apartment property with closing scheduled for Monday morning. He called Actium on Friday morning.

They sent one of their team members to appraise the property that afternoon. The appraisal revealed that the property met Actium’s requirements for approval. Meanwhile, the team at the office began drawing up the paperwork that afternoon. On Monday morning, they electronically forwarded both the loan documents and funding to a title company. Closing went on as scheduled and the deal was done.

Fast Approval

There are three particular areas in which hard money’s speed is advantageous. The first is loan approval. Irrespective of how quickly a loan is funded, borrowers really don’t like waiting for days to get an approval decision. More importantly, the types of borrowers who take advantage of hard money cannot afford to wait that long. They need answers in hours.

Using the previous Actium example, the investor in question was at risk of losing the deal altogether. He could not wait for a decision that wouldn’t be rendered until Monday afternoon or Tuesday. He needed to know that day where he stood. Because if Actium turned down the loan, he would have to go elsewhere.

Hard money lenders can make fast decisions because they do not have to conduct long, drawn out credit investigations. The only thing that interests them is the value of the asset being offered as collateral. If a firm has its own appraiser on staff, approval does not take very long.

Fast Funding

The second area is funding. Hard money lenders have cash in hand that they are ready to lend. The minute paperwork is ready to go, they can forward it electronically along with the cash. And if you know anything about electronic financial transactions (EFTs) in the digital era, you know they are nearly instantaneous.

A hard money lender does not need several days to get cash together. Lenders can fund as quickly as technology allows it.

In and Out Quickly

Finally, hard money is fast in relation to loan terms. A typical hard money loan has a term of 6-24 months. The maximum is generally 36 months. That might not seem fast initially but compare a hard money loan to a traditional loan with a term of 10-15 years. Getting in and out in 6-24 months is pretty quick.

Hard money lenders prefer exceptionally short terms so that they do not have to tie up their money for too long. Short terms are not necessarily a bad deal for borrowers, either. By getting in and out quickly, borrowers can move on rather than being tied to a lender for years on end.

Speed is the name of the game in hard money. Hard many loans can be approved quickly, funded quickly, and exited in considerably less time than a traditional bank loan. For certain types of financing needs, hard money and the speed it offers are the perfect combination.