The SBA helps small businesses get loans
The SBA works with lenders to provide loans to small businesses. The agency doesn’t lend money directly to small business owners. Instead, it sets guidelines for loans made by its partnering lenders, community development organizations, and micro-lending institutions. The SBA reduces risk for lenders and makes it easier for them to access capital. That makes it easier for small businesses to get loans.
Private money is a commonly used term in banking and finance. It refers to lending money to a company or individual by a private individual or organization. While banks are traditional sources of financing for real estate, and other purposes, private money is offered by individuals or organizations and may have non traditional qualifying guidelines. There are higher risks associated with private lending for both the lender and borrowers. There is traditionally less “red tape” and regulation.
Private money can be similar to the prevailing rate of interest or it can be very expensive. When there is a higher risk associated with a particular transaction it is common for a private money lender to charge an interest rate above the going rate.
A hard money loan is a type of loan that is secured by real property. Hard money loans are considered loans of “last resort” or short-term bridge loans.
Fix-and-flip loans are short-term loans used by real estate investors to purchase and improve a property to then sell for a profit. These improvements range from minor renovations to a complete reconstruction of an existing home. Fix-and-flip loans are used exclusively for residential real estate investments, so renovating a school, for instance, would not qualify for this type of funding. In a fix-and-flip project, the property is often purchased at auction, through a foreclosure or a bank short sale. A buyer may later try to sell the property “as-is” or may choose to add value by improving on the property before selling it. This is where fix-and-flip loans come in. When a buyer decides to upgrade and resell the property for profit, fix-and-flip loans are typically used to cover the upfront costs of renovating the property.