Coronavirus lending 101: How hard money can help

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The Coronavirus has thrown the economy off a cliff leaving many equity rich property owners with no cash flow. The pandemic has caused many residential and commercial tenants to defer or totally miss payments as the economy shuts down. Property owners are still on the hook to pay their mortgage and expenses on the property (taxes, insurance, maintenance, etc…). What do you need to know to get funding?

Property owners need cash now

The Coronavirus pandemic has exposed huge cash flow issues throughout the economy. As one sector is forced to shut down to stop the virus spread, the cash flow contagion begins to flow through the economy. For example most states have shut down restaurants and bars. Many owners of these businesses no longer have cash coming in (or substantially less than before the virus) and have been forced to lay off employees, order less (or no supplies as sales slow/stop), defer or stop paying rent, etc… the employees of the business are no longer drafting a paycheck and might miss rent and will also cut back on other purchases. Long and short, the economy is so interconnected that a sudden shutdown like we are seeing will be catastrophic for cash flow.

Why wouldn’t you go to a bank?

The Federal reserve has spent billions pumping cash into the large banks to ensure liquidity. Unfortunately, this doesn’t mean they will lend it. Take a restaurant that has been forced to close for 60 days, they are now having a cash crunch and they walk into their local bank for a loan. Without hesitation the bank gives a fast loud and clear no! Why? The bank looks at your cash flow and it is basically zero, they don’t want to make a loan as the repayment could be questionable due to the virus.

Furthermore, even if the bank says yes, speed is not on your side. I am currently refinancing a bank loan to give the borrower cash out to help them weather the pandemic. I requested a payoff from the bank, just for a payoff it has taken them two weeks. Imagine how quickly they will fund a loan! There is very little probability it will be in the next 60 days with everything going on.

Why will a hard money lender make loans during the pandemic?

As banks pull back, the economy needs cash, the federal government and banks have left a huge void. Many property owners have tons of equity but are unable to utilize it for these short-term needs. We have created a program to “bridge” this gap in cash flow. I also don’t foresee the pandemic lasting forever, at some point the economy will get back to a sense of normalcy and borrowers will see their cash flow positions rebound.

How can a hard money loan help?

1. Close quickly: on average Fairview can close in 5-10 days,

2. Fund in cash, not ruled by secondary markets: Since we aren’t a bank, we can make loans that make sense for the borrowers based on the current circumstances.

3. Understand the cash flow issues and still fund: When you call you can talk with a principle that can make a decision based on your needs, there are no loan committees.

4. Creative deal structures for the unique situation: We have been lending since 1975 and have been through many real estate and economic cycles, we understand what is going on with the

market and can structure a loan solution to meet your needs. For example we just closed a loan and funded an interest reserve for 6 months to help the borrower get over the short term shock of tenants not paying.

5. Hold and service all loans We are not raising capital from Wall street and therefore can continue making loans in light of the changing circumstances from the virus.

The economic shock and fallout from the Coronavirus pandemic are unprecedented. The federal government and their various programs along with many banks and traditional lenders are unable to assist quick enough for small businesses. At Fairview, we understand what is happening in real estate and can structure a short-term solution quickly to meet your needs. Please give us a call (866.634.1270) or e-mail (info at to discuss your needs.

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