Business Owners Turning to Private Money Lenders For Business Loans

[Corey Dutton]

Despite pressure from the Community Reinvestment Act, designed to encourage banks to meet the credit needs of businesses in local communities, business lending has contracted 45% since 2010. More and more I am seeing business owners come to us for private money and hard money loans to capitalize their businesses. Whether the credit is used for buying inventory, meeting contractual obligations, or investing in company growth, business owners are unable to access lines of credit that used to be available from banks.

Because most hard money lenders use real estate as collateral for loans, business owners have been getting creative by pledging all types of collateral to fund their businesses. Some of them are cashing out of investment properties, refinancing their commercial buildings, or even mortgaging their homes in order to get the precious cash they need to fuel their businesses.

Although government measures are in place to stimulate business lending, without perfect credit and cash reserves, most business owners are just passed over by their bank.

Any further thoughts on this topic?