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3 Year Financial Model
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Buy Complete B-Plan Templates
Complete Industry Research
3 Year Financial Model
Lender Directory Included!
Just $18.95

Your Resource for Obtaining Business Financing


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:

 

 

 

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

 

 

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

 

 

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:

 

 

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