Tips on How to Approach Private Money Lenders
When applying for a personal loan from a private money lender, it is important to present your case with confidence and in the most convincing manner.
Make your proposal attractive and try to think of strategies that can make it more feasible.
This is the best way to express your drive to succeed in your venture. It also puts a lot of emphasis on the purpose of your loan.
Here are some tips and advice that you need to keep in mind when applying for a loan from private lenders;
You have to be specific with the purpose of your loan. You have to know exactly what you want and your means for achieving it.
Prepare a Good Proposal
If you’re dealing with your secondary contacts and tertiary contacts (private lending companies/hard money lenders), it is advisable to prepare a good loan proposal.
You have to come up with a detailed plan that outlines your business.
Although this might not be necessary, because private lending is all about establishing “relationships”, it might help in acquiring better loan terms.
You have to show confidence in your investment venture as well as on your capacity to repay the loan. In this way, private lenders can gain confidence on you as well.
Calculate the Risks
Carefully weigh the pros and cons of your investment.
How much are you willing to risk? How much can you afford to lose? By being aware of the risks, you can create plans on how to avoid them.
Expect Higher Interest Rates
Private lenders have higher interest rates compared to banks (which usually have an interest rate that range between 3.5 and 4.5%).
Interest rates for private money lenders range between 8 and 15% for some and can go as high as 20% for other lenders.
This is how private money lenders make money out of their business.
Focus on Your Primary Network
If you want to stay on the conservative and safer side of things, it’s best to turn to your primary network for funding solutions.
This includes your parents, siblings, immediate family members and closest friends.
You might not get 100% funding, but whatever amount they can offer could be enough to initiate your project.
Prepare Important Documents
Private lenders would most likely ask for supporting documents. It’s either they will consider them as collateral or loan guarantee.
Whatever the case, it is important to have something that you can show to prove that you have the ability to pay back the loan.
Learn How to Negotiate
In your search for private lenders, you may come across private investors who are on the aggressive side of things.
For this reason, you have to learn how to negotiate for the best deal. You have to be realistic because nodding to their every demand can get you into trouble later on.
Therefore, learn how to play your cards well by negotiating for a deal that you can handle without a heavy burden on your shoulders.
Being more realistic can save you from serious consequences.