1. What are hard money lenders?
Hard money lenders are private companies that offer alternative loans secured by real estate. These specialized investors provide loans that banks do not offer, and typically set loan terms for only one year.
Sachem Capital Corporation (SCC) employs the concept of value-based lending in funding non-conventional loans for commercial and investment properties. Our loans, which can be structured for up to three years, require minimal documentation.
2. What does “hard” refer to in “hard money lender”?
The word “hard” is a reference to the loan being secured by the borrower’s real estate as opposed to business furniture or equipment.
3. How do hard money lenders differ from banks?
Hard money lenders make loans available quickly, require less documentation and charge minimal upfront fees. While banks loan money to borrowers with good cash flow, solid credit scores and strong assets, hard money lenders focus on the collateral for the loan. Underwriting standards are less complex than full documentation loans and last minute surprises are kept to a minimum.
4. What should I be aware of when borrowing from a hard money lender?
Most hard money lenders demand application fees, points and non-refundable deposits upfront. They may even initiate the loan with no capital (lendable funds) to back it up, collect your deposit but have no intentions of providing the loan to you.
At SCC, we believe the term “hard money lender” is not a fair representation of our mission. We are value-based lenders making every effort to explore all reasonable alternatives to fund your transaction. Loan reviews and due diligence are performed with our money, not yours, so no upfront fees are required.
5. What is the purpose of a value-based lender?
As a value-based lender, SCC specializes in working with borrowers who do not fit traditional lending guidelines. We have consistently provided innovative, secure financing solutions for challenging, hard-to-fund loans. Our success is built on understanding the unique character of each borrower’s request, and providing them with personal and responsive service.
6. Why should I consider SCC?
If you do not have the time or energy to deal with a conventional lender, you should look to SCC. At SCC, you will not be bothered with upfront fees, a pile of paperwork or endless concerns from an underwriting committee. Funding commitments usually take only a day or two.
Like other value-based lenders, SCC speeds up the application processing time, making funds available quickly. Unlike banks, our focus is not on your personal financial situation. We aren’t poring over your credit scores, tax returns, earnings records and asset information. Instead, we open up the opportunity for you to capitalize on your real estate. We look at your hard assets—the commercial or investment real estate used as collateral.
7. Do I need to pay upfront fees when submitting an application to SCC?
SCC does not charge upfront fees prior to looking at your loan request. As a borrower, you should be very wary of anyone asking you for money prior to a loan commitment.
8. How difficult is it to start the loan process with SCC?
It’s easy! Simply click on the Loan Application link and send your information to us. We will contact you immediately to discuss your funding request.
9. What types of borrowers does SCC help?
SCC’s borrowers range from those with bad or slow credit, to the time-constrained, or those in need of quick financing to solve a problem or capture an opportunity.
10. What types of property does SCC consider for a loan?
SCC takes into account general commercial properties, including office, retail, mixed-use light industrial, single-family investments and multi-unit buildings.
11. What is SCC’s minimum/maximum loan amount?
At SCC, we lend from $30,000 to $750,000. Every deal we look at is different. If you are unsure of how you fit, send us a quick e-mail.
12. What is SCC’s maximum loan-to-value (LTV) ratio?
We use 50% of the property’s value, as determined by SCC. Again, every deal is unique, so if you think you may not fit our guidelines; send us an e-mail stating your concerns.
13. How does SCC calculate the LTV ratio?
We inspect your property and consider your monetary request to determine SCC’s lending limit. In every instance, we will do our best to fund the deal.
14. Why is SCC’s LTV only 50%?
Since SCC requires no documentation from you and we underwrite on the collateral’s value, we must be certain that we are well secured.
15. What types of loan programs are offered by SCC?
We can offer you interest-only, as well as amortizing loans. SCC’s loans are typically for three years. The specific details of your loan are based on the collateral, your monetary needs, and your exit plan.
16. Can SCC loan money on two properties to do a deal?
We can collateralize two or more pieces of real estate in an effort to fund your loan.
17. What are SCC’s rates?
We do not have a formal rate structure because each loan deal is unique. We price interest rates based on the merits of the loan funding request. We also have programs for investors who use Sachem Capital for their short term financing needs.
18. What documents do I need when applying for a value-based loan?
SCC requires limited financial information from you to proceed with a loan request. Most often a thorough understanding of your real estate collateral is all we need to schedule a funding date. Depending on your circumstances, we might ask you for one or more of the following:
- Past tax returns.
- Proof of income.
- Assurance that you have access to enough capital to make all the proposed renovations.
19. What is a Letter of Intent?
A Letter of Intent, LOI for short, presents the terms of your loan request. It spells out the agreement between you, the prospective borrower, and SCC, the lender. The document is not legally binding; however, it does clarify the main points of the agreement in an effort to avoid misunderstanding down the line. It will give you, the borrower, a good feel for the costs involved to process your loan.
20. Why does SCC require title insurance?
Title insurance protects SCC’s financial interest when funding value-based loans. Our title insurance policy protects the lender’s financial interest against competing claims of ownership or liens. If a contending claim proves legitimate, the insurance company will reimburse SCC, the insured, for the monetary loss.
21. Do collateral properties have to be seasoned (owned for a period of time)?
In most cases no. The purchase price is usually a good indicator of value especially if it was a recent purchase.
22. What is SCC’s minimum credit score?
SCC does not have a minimum credit score. We underwrite based on the value of the collateral.
23. What if the borrower has good credit, but wants a “no-doc” program. Can they get a better rate?
It is possible to offer a “no-doc” lending product depending on the property type and its value. While SCC cannot beat a full doc lender in terms of your costs, we can close quickly. This, in turn, may provide the borrower an opportunity to negotiate a lower purchase price on the real estate.
24. Are value-based loans personally guaranteed?
In most instances, SCC requires that the borrower personally guarantees the loan.
25. What if a borrower defaults on a value-based loan?
When a borrower does not pay back a value-based loan, the lender can foreclose on property used as collateral. At SCC, we make every effort to prevent such situations and work with borrowers so that a Notice of Default resulting in the foreclosure process is avoided.
Do you have a question that was not addressed here? Give us a phone call at: 860-280-4334.