Unsecured Lines of Credit

Most people who are looking for funds for renovations, additions, business expansion, or other financial needs turn to equity lines of credit or other types traditional credit loans. These types of lines of credit are popular and relatively simple to get, but what if you do not have any equity or assets to borrow against? If you find yourself in need of a line of credit but do not have any assets for collateral, or do not want to risk your valuable property you do have, and unsecured line of credit is another option for you.

An unsecured line of credit gives you the cash you need in the timeframe you need just like any other line of credit. Your credit line is based on an amount determined by your credit history, repayment ability, and income and you can use all or part of it as the need arises. The major difference between an unsecured line of credit and a secured one is that you do not have to put up valuable property but will have to pay a higher interest rate.

In order to qualify for an unsecured line of credit you will have to prove that you will be able to repay up to the full amount of the credit line in monthly payments. Your lender will analyze your income to debt level, your credit score and history, your employment history, and may want references. If you have good credit and can afford the monthly payments on the credit line you will probably qualify.

An unsecured line of credit is right for you if you need a credit line but do not have assets to use as collateral. Be careful, however, because it will take more research to find the best deal as they carry higher interest rates than secured credit lines. Talk to the banks in your city to see what the going rate of interest is locally and how much you qualify to be approved for.

National lenders will often have some of the best rates so it is always a good idea to look online for national lender rates. If you cannot find a bank willing to give you an unsecured line of credit you can usually qualify for a credit card, but using a credit card for your cash needs can be risky as many have fees and very high interest. Look into all your options so that you can get the best deal possible on your credit line.

Commercial Hard Money Lender

Commercial hard finance provider is a company or a private person loaning financial support. Often money-making hard cash loans are being issued with a higher interest rate than the traditional hard cash loans. Commercial hard money loans are usually being given for a short period of time and sometimes they are called bridge loans or bridge financing.

As traditional commercial hard money loan programs are very risky and have a higher than average loans likelihood of default, money-making hard finance providers offer a wide range of requirements on the type of real estate, special loan-to-value percentage and the certain minimum loan size for a money-making hard cash loan.

Bridge lender programs and commercial hard money loans:

Bridge lender programs and money-making hard cash loans are similar to the traditional hard money in the part of terms of the interest rates and loan to value requirements. A commercial hard cash lender or a bridge lender could usually be described as a strong financial institution with a large deposit reserves. Making a discretionary decision on a not conformed loan is totally in his power. Usually money-making finance providers (or borrowers) not conforming to the standard guidelines of a residential conforming credits.

And because of the fact it is a commercial property, commercial hard cash loans usually also do not conform to the guideline of the standard commercial loans. It is the usual and absolutely normal situation if the borrower is in a temporary financial distress or has just a building permit in place. The commercial property may not be in a good and marketable condition for a number of reasons; it may not be completed after the process of construction or reconstruction etc.

Some commercial hard cash lenders (bridge capital groups or private investment groups)could require some sale-lease back requirements or the joint venture to create an additional background for such a risky transaction that has a really high default rate. It is really usual situation when money-making hard finance providers temporarily offer hard or bridge money, allow the owner of the property to buy back his property within only a certain (as usual, not long) time period. If the property was not bought back by purchase or if it was sold within the period of time the money-making hard finance provider would get a right to keep the property at the agreed to price. In the case of default the property owner may lose the property to foreclosure.

Commercial Loans - Bad Credit

Commercial loans for borrowers with bad credit are limited to a few options. Often borrowers find themselves in very difficult positions as many traditional and nontraditional banks will not even look at their loan request if their score is below a 650. Too often the borrower's credit score is unfairly reported as many commercial borrowers have great credit history, but because they have multiple mortgages, multiple lines, etc. their score is erroneously brought down even though they have never been late on a single payment. We see it all the time.

Options for borrower with bad credit are, in general limited to 3 options - SBA commercial loans, commercial hard money and "story" lenders.

SBA commercial loans carry a lot of misperception by borrowers. The biggest and most important for you to know is that NOT all SBA lenders are the same. And more to the point, the SBA never actually loans any of its own money. They only guarantee banks that they will be paid back if the borrower defaults. So the point is that the banks make up most of the underwriting criteria. There is NO minimum credit score that the SBA mandates. For example we work with a bank out of New Jersey that will often fund SBA commercial loans with borrowers credit score in the low 500's.

Commercial hard money is probable the first thought for many when considering a commercial loan with a borrower that has bad credit. Most hard money commercial lenders are interested in the properties equity and or its cash flow and the borrower's credit score is often just an afterthought.

Commercial Hard money lenders want to see at least 40% equity in the property or a 60% loan to value in order for them to seriously consider funding the deal. Speed and flexibility with underwriting are the highlights of commercial hard money. The expense is the downside. Borrowers should expect to pay 3-6% points and have a rate around 13-16%.

"Story lenders" are banks that are willing to listen to the borrower's story about their difficult situation.

They are often willing to overlook many difficult situations such as bad credit, weak business cash flow, high loan to values, etc. Although there are few banks that would describe themselves as a story lender the borrower should look locally or work with professionals in the business that may know of a few banks that can get over their difficulties.

For example, we recently closed a loan that was in foreclosure by refinancing it with another bank that was more willing to listen to the borrower than their existing bank. Their situation was that their loan had ballooned and despite their best efforts they could not get their existing bank to refinance the loan or find another bank that would either. After a year of searching they couldn't get it done and their existing bank put more pressure on them by calling the "note" (forced foreclosure). We knew of a bank out of California that would be interested, provided the borrower refinance some of their unsecured business loans into the proposed loan to improve the borrowers over all cash flow.

So, borrowers with bad credit seeking commercial loans should be prepared for some "brain damage" as they will have to find a viable source after hearing many "no's".

Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He has a STORE for commercial loan brokers. Contracts, spreadsheets, books, etc. Products starting at $4.95! Check it out commercial real estate loans or commercial mortgage broker store or commercial loan rates