Why You Can’t Get A “Traditional” Loan

The comedian Bob Hope once joked that “a bank is a place that will only lend you money if you can prove you don’t need it.” Today’s risk-averse banking environment means many real estate investors in need of a quick infusion of capital face a choice: keep a project in a holding pattern or try to land a partner or other investors.

But there’s a third approach that too many builders of homes, condos, hotels, and shopping centers may have tuned out: So-called ‘hard money lenders’ who offer bridge loans can be a smart alternative for investors looking to see a project through to completion.

There are many differences between traditional banks and bridge loan providers according to one of the leaders in the industry, Kevin Wolfer, CEO and President of Kennedy Funding. First, banks are heavily regulated. Their lending practices and rules may prohibit extending more credit to borrowers who have already incurred substantial debt. “Unlike traditional lenders, we can close quickly if everything is in order. Sometimes in 10 days or less,” according to Wolfer.

While it’s true hard money lenders are more expensive, the fees make many deals that otherwise would be impossible happen. When you’re talking about the need for a few million dollars quickly holding up a project that is valued in the tens of millions, those fees are trivial in the grand scheme of things.”