Looking to Non-public Money Banks During the Credit Crisis ...

As a country of debtors, we are all conversant with loans in some way or other. From car loans to mortgages, most of us have been knee deep in a loan at some particular point. There are certain kinds of financing, for example hard cash loans, that are less familiar.

The finance industry is a poser to lots of people. When banks were failing right and left, many wondered where the money was going. As we start bailing out and recapitalizing banks with $700 bln, many are surprised to see banks are still not lending. Heck, the federal government has even sent a directive to banks informing them to do that. Notwithstanding this, money is still hardly trickling into the credit market.

Folks and firms wanting financing now are in a tough spot. Many have money flow issues that need vital financing, but banks simply are reluctant to loan funds because they have collectively been burned so badly over the last couple of years. This creates a gap in the finance market. The beauty of capitalism is there is always someone willing to fill that gap.

In the current financial climate, the parties happy to fill the loan gap are called license moneylender . These are groups that are used to providing bridge financing to firms and individuals in need. Whereas they have regularly been regarded as banks of last resort, they are now becoming a common funding source given the aversion of banks to get into the market.

Non-public money lenders are pretty much what the name says. The usually are composed of a fund into which well off people contribute money. The fund then has a designated purpose such as providing short-term financing on residence projects, manufacturer cash flow scenarios or whatever.

You should note the repeated mention of "short term" financing. Private cash isn't used like standard financing. It isn't intended to cover a whole project from phase one through completion. Instead , non-public money is mostly designed to cover an opening between periods when standard financing can be instituted.

The current market is an ideal example of when personal cash is a good option for most. Let's assume you are converting apartments into condos. The project is going to take two years. You have licensing that requires the project to be undertaken in the next 180 days. You are having problem getting financing from a bank.

Personal cash can frequently be used to buy time in that particular situation. You can get a one year loan that can let you get started so that the license does not go bad. You also buy time to arrange traditional financing. Even if the banks are not currently loaning, they might be in another half a year. If not, you can arrange for extra private money financing.

Is non-public money a good form of financing for every scenario? No. It is dear. In a market like the current one where things are really tight in the credit arena, it often makes lots of sense.

Source: http://faxless-payday-loans-review.blogspot.com/2013/06/looking-to-non-public-money-banks.html

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