Free Hard Money Lender Business
Plan
Obtaining Business Financing
When obtaining a business loan
for a hard money lender business, it is imperative that you have a properly
structured business plan that will assist you in showcasing how you intend to
operate your Hard Money Lender, how the business will operate, how you intend to
market the business, the anticipated financial results of your company, and how
you intend to repay your debt obligations. This sample loan business plan will
provide you with the framework that you need in order to acquire a business loan
for starting or expanding this type of business.
Executive Summary
Introduction
When obtaining a business loan
for a Hard Money Lender, it is imperative that your business plan has a clear
and concise executive summary that provides an outline of what are seeking to
accomplish, how much capital you are seeking to raise, the management biography
of the business owner, and an overview of the anticipated profit and loss
statements of the business. Here is an example of how the title paragraph should
be written:
Hard Money, Inc. (“the
Company”) is seeking a business loan of $100,000 in order to launch the
operations of a hard money lender and brokering business that will be based in
San Francisco,
California. The Company was founded in (Insert Year).
The business was founded by Mr. John Doe.
Products and Services
In the next segment of the
business loan and business planning document, you should showcase the products
and services that you will be providing to the general public. For instance:
The Hard Money Lender will
provide its customers with the ability to acquire short term loans against
collateral that they own or are seeking to own. The Hard Money Lender will
provide and source loans that carry loan to value rates of approximately 60%.
The average interest rate will be 10% while initial points on closed loans will
be equal to 4% of the closed loan amount.
Business Loan Terms
Now it is time to discuss the
anticipated terms of the business plan that you are seeking. An example
paragraph of how this is stated:
At this time, Mr. Doe is
seeking a conventional business loan in the amount of $100,000. The interest
rate, loan terms, and loan covenants are to be determined during negotiation.
However, this business plan assumes that the business will receive a seven year
business loan with a seven percent interest rate due on the outstanding
principal balance.
Management Biography
Now that the summary of the
business has been provided, it is time to provide a brief overview of the owner
of the business. An example paragraph summing up the owner is as follows:
Mr. Doe is a highly experienced
business person that has years of experience regarding the direct ownership and
management of business. He will be able to effectively bring the operations of
the Hard Money Lender to profitability while ensuring that the business loan’s
payments and its covenants are met at all times.
Financial Statements
The most important thing to
your lender when applying for a business loan is how you intend to repay the
bank. In this section of the business plan, you should provide an overview of
the finance’s of the business discussing the anticipated revenues, expenses, and
profits/losses. You can also discuss the applicable collateral within the
business plan that will be used to secure your business financing.
Expansion Plans
One of the most important
aspects of your business plan is how you intend to expand the business over a
three to five year period. Banks and finance companies always want to see that
the business will experience a moderate to strong level of growth. This is
especially true in business lending because as your business grows the cash flow
that secures your business loan will decrease proportionality against your
monthly credit obligations. An example of how this is stated is as follows:
The Hard Money Lender will
continue to expand through organic means including increasing the Company’s
advertising budget via the reinvestment into the after tax cash flows of the
business. Additionally, if the business is highly successful then the Company
may seek to establish additional Hard Money Lender office locations after the
third year of operations.
The Financing
Use of Business Loan Proceeds
In this section of the business
plan you should focus on how the proceeds of the business loan will be used. An
example of this would be as follows:
- Hard Money
Lender Office Establishment - $50,000
- FF&E
- $10,000
- Working and
Lending capital - $40,000
Management Equity
In this section of the business
plan you should discuss the percentage ownership of the business among the
owners of the business. For example:
Mr. Doe will own 100% of the
Hard Money Lender.
Board of Directors
When applying for business
financing, the bank will also want to know who serves as the board of directors.
For small businesses, usually the owner serves as the director of the business.
An example of how this is worded:
Mr. Doe will be the sole
director of Hard Money Lender, Inc.
Exit Strategy
Any bank or financing company
is also going to want to know what you intend to do with the business over a set
period of time. Many business owners will develop and expand a business with the
intent to sell the company to a third party at a later time. When drafting this
part of the business plan you should focus on what you intentions are in regards
to potentially selling the business. This is often worded as:
Mr. Doe would most likely sell the Hard Money Lender to a third party
for a significant earnings multiple. Hard Money Lenders usually sell for
approximately one to three times earnings given the financial strength of the
business. In this event, the business would be sold by a business broker and the
business loan sought in this plan would be repaid according to the covenants of
the business loan agreement.
Products and Services
When developing a business plan
that is appropriate for obtaining a business loan or other business credit
facility you need to clearly showcase the services or products that you will be
offering to the general public. An example of how this section is worded goes as
follows:
The Hard Money Lender, on
behalf of its borrowers and clients, will provide bridge loan and hard money
capital to individuals that are seeking loans with an LTV of 60% or less.
Typically, these loans are anticipated to have a term of 12 months to 18 months
with an average interest rate of 7% to 15% depending on the credit quality of
the borrower. If the loan amount exceeds the amount of capital than that Hard
Money Lender can provide then the business will source capital from third party
hard money investing agents operating throughout the Company’s targeted market
of
California.
At all times, the business will
remain within the letter of the law regarding providing loans to the general
public.
Industry and Market Analysis
The
Current
State of the Economy
It is important to let your
financial institution know that you are well apprised of the financial situation
of the general economy when you are applying for a business loan. This is
especially true in today’s environment where lending has become more difficult
and will remain more difficult in the foreseeable future. Specifically, you
should gear this section of the business plan analysis towards the industry that
you are operating within. For example:
The current economy has
remained difficult over the past few years. However, Hard Money lenders
typically see their borrowing rates increase during times of economic difficulty
as people seek to refinance properties and other collateral. As such, the
business will be able to remain profitable and cash flow positive at all times
as the business will be able to provide capital (albeit at a higher interest
rate) to its customers.
The Hard Money Lender Industry
In addition to providing your
business loan officer with an understanding of the general economy, it is
important that you showcase that you have an equal understanding of the industry
in which you are operating within. As such, you will need to provide you
business loan institution of a brief overview of your industry and any potential
changes that may affect the way that your company does business. An example of
how an industry overview is as follows:
In the
United States, there are approximately 1,500
businesses that specialize in making hard money loans to the general and
business public. Each year, these companies produce more than $15 billion of
interest fees and closing fees. The industry employs approximately 50,000
people. Many of these firms operate solely in a brokerage capacity while others
provide hard money lending services in a manner that is akin to mortgage banking
firms.
Target Market
In this section of the business
loan application and business plan analysis, you should focus on the
demographics of your localized market (or national market if applicable). This
section should discuss how many people live in your area, the anticipated number
of people that would require the use of Hard Money Lenders, the median household
income of people living in the area, poverty line statistics, and any applicable
laws that would apply to your operation of Hard Money Lending.
Competition
Many people that are developing
new businesses or expanding existing businesses often feel that their business
does not have any competition or limited competition at best. However, this is
almost never the case. Unless you have re-invented the wheel – you will have
competition. When applying for a business loan, you should clearly showcase your
competition in your business plan. This is especially important to your banker
as they will be able to gauge your ability to be successful in your targeted
market. Many business loan underwriters will aggressively confirm that
competitive nature of your local market and your local industry.
When drafting this section of
the plan you should heavily discuss the competitive advantages that you intend
to have over your competition.
Marketing Plan
In addition to all of the above
information that we have covered, your business loan officer is also going to
want to know how you intend to market your business to the general public. Most
people do not quite understand how to effectively market their business outside
of prominent signage or flyer distribution. When applying for a business loan
(again in this difficult lending climate), your banker is going to want to see
that you have a clear methodology of how you intend to market your services or
products to the general public. In this section of the business plan – we will
overview how to showcase your services/products to the general public.
Marketing Overview Example
- The Hard
Money Lender will place prominent signage on the facility to draw a significant
amount of foot traffic.
- The business
will maintain listings in the Yellow Books.
- The Hard
Money Lender will also maintain an internet website that showcases the Company’s
operations, hours of operation, and relevant contact information.
Marketing Strategies Overview
Additionally, you will be
required to further drill down (in your business plan) how you intend to
implement your strategies when you launch or expand your business’s operations.
In this section of the business loan and business plan documents, you should
amplify the bullet points from the section above. For instance:
The Hard Money Lender intends to use a number of strategies that will
create instant traffic and customer flow to the Company’s location. These
strategies include not only using prominent facility and road signage, but also
distributing flyers to people that fall into he Company’s targeted demographics
of borrowers within the Company’s market of
San Francisco. The business will also regularly take out
advertisements in localized newspapers that showcase the Company’s hours of
operations, hard money lending services, and fees associated with the Company’s
services.
The business will also maintain
a highly informative website that showcases the Hard Money Lender’s services,
its hours of operation, licensure information, and other relevant information in
regards to the Company’s services. This website will be listed on major search
engines such as Google as many people now use the internet to locate local
businesses.
Finally, the Company intends to
develop strong referral relationships with mortgage brokerage firms, law
offices, accountants, loan officers, and real estate agents within its target
market.
The Financial Plan
Beyond any other part of your
business loan application or business plan, the financials section of these
documents are what matters most when applying for a business loan or any other
type of credit facility. Ultimately, this section of the business plan showcases
not only what your anticipated profitability will be, but also how you intend to
repay the funds that you have borrowed through your business financing facility.
An example of how this section is structure is as follows:
Assumptions
- Hard Money
Lender, Inc. will have an average annual growth rate of 10% per year.
- Mr. Doe will
acquire $100,000 through a business loan in order to launch the operations of
the business.
Proforma Financials for a
Business Loan
Now it is time to showcase how
you intend to repay your loan, generate a profit, and increase the book value of
your business over a three to five year period. BusinessPlansForLoan.com has
developed an easy to use financial model that you can use when drafting out the
financial model for your business plan and business loan application. Through
your business loan application, you will be required to have the following:
- Profit and
Loss Statement for your Hard Money Lender
- Cash Flow
Analysis for the Hard Money Lender
- Balance Sheet
for the Hard Money Lender
- Business Loan
Amortization Tables
Please see images below