I wanted to drop a strategy here for the group, because sometimes we Veterans 🇺🇸 need money to operate our ventures, but don’t have the down payment needed to get a loan large enough to satisfy our need. 🙁
This is a two step strategy 🛠⚙️ which involves both a Hard Money loan as well as a traditional operating expense loan or SBA loan:
1.) work with a reputable lender that can get the process started on the operating expense or SBA loan. During the process, you will reach a stage where they tell you what the terms are going to be which includes your interest rate as well as the needed down payment to proceed… you will pause here with that stage and proceed to the next stage… we will return to this part momentarily.
2.) knowing what your down payment is 💡now allows you to start talking about getting a hard money loan. The total amount of the hard money loan is ONLY going to be what your down payment is on the operating expense/SBA loan.
Most lenders will do one or the other, however a few will do both, because they are experienced in doing this combo strategy. Hard money loans typically do not have down payment requirements, but the trade-off is much higher interest rates. That is ok, because you won’t have it very long, thus accruing much if any interest. Many hard money lenders can get you the needed money very fast (around a week), which is quicker than the operating expense loan (approx 4 weeks).
3.) now that you have received the down payment funds from the hard money loan 💵, you can pay the down payment for the full operating expense loan which has a lower interest rate. Keep in mind that this loan will include the amount of the down payment, so that you can pay back the hard money loan immediately, thus avoiding interest. 😁👍
Once you have received the operating expense loan, you are able to pay off the funds at a more comfortable pace.
For advanced strategy, we could add a third layer to this process by putting the operating expense loan funds into a “self funding vehicle” which I can talk I’m more detail in a future post if requested… those strategies typically can return approx 5%-7% at current rates , so you are actually able to pay off the loan from the interest earned from the “self funding vehicle”, thus allowing you to make money on the borrowed amount – which in turn can also be borrowed upon at an even lower interest rate. Repayment terms here, will not have the same rigorous repayment terms as a traditional loan, not to mention, you are still earning interest on the original sum of money even though you have borrowed part of it. Much like giving yourself a line of credit.
Note: If you are a real estate investor or are purchasing a business or franchise, then you may also want to consider including remodeling expenses in your operating expense loan as well as RE / franchise purchase price. For this application, you would not be doing everything EXACTLY as mentioned above, given you are likely going to be immediately spending the money from the loan, thus not able to do the “self funding vehicle” strategy quite the same way… I have other tricks for you guys, so keep an eye out for that post!