The Advantages of Asset Based Lending
The traditional mortgage lending process is a long tedious affair. Traditional mortgages require a lengthy application after which there is a seven-day waiting period from disclosure before a loan can close. And once a borrower has received a Closing Disclosure, they must wait an additional three days before the loan may actually close. And those are just the time frames imposed by the Consumer Finance Protection Bureau. Anyone that has gone through the traditional mortgage process knows this is usually much longer that the ten days required above. The time involved in obtaining credit reports, income information, bank account information, appraisals, and all the other moving pieces of these types of transaction often adds up to more than thirty days.
In addition to the cost of lost time, the traditional mortgage also involves an intrusive credit review, with often difficult to meet standards. The financial crisis of 2008 dried up a lot of the liquidity in the financial market, and the requirements for borrowing money became far more stringent. Whether or not this has been a good thing, stabilizing the residential home loan market may be debated, but it has negatively impacted the commercial real estate borrower. Small companies and real estate investors often do not have the net worth, credit scores, or cash flow to qualify for a traditional mortgage loan from a bank or mortgage company.
The real estate investor’s need for access to capital to purchase, repair, upgrade, or build new commercial property is very real however. This is where asset based lending comes in. Rather than basing credit decisions on intrusive credit reviews, minimum credit scores, or other personal information, lending is based on the value of the property being purchased or refinanced. An estimate of the value of the property is used to determine the amount of money that can be borrowed. In asset based lending, the property is the collateral securing the loan, not the borrower’s credit score.
Here at Larry the Lender, we make a value determination, and then make all lending decisions. The short application process makes this much faster than a typical mortgage loan. Often loaning up to eighty-percent of the value of a property, Larry the Lender’s asset based lending can be an invaluable tool for real estate investors and commercial real estate borrowers. Buy today and close tomorrow.