FAQ

Hard Money
What is Hard Money or Private Money Lending? Non-institutional private money, primarily real estate asset based lending, short-term "bridge financing". Hard Money is typically utilized in situations where speed in closing is critical, the property is unusual or the borrower has some blemishes on credit.

What types of clients utilize these loans? Once thought of as a last resort of strapped borrowers, hard money loans which have different lending standards than traditional mortgages, are attracting a larger, more affluent group of consumers. Unlike a traditional mortgage, which is largely defined by credit scores and the borrower's ability to repay, hard money loans are based almost entirely on the value of the underlying asset. That means a borrower's income and credit score aren't nearly as important as they otherwise might be. Borrowers needing a short term loan or a 'bridge' loan are required to have substantial equity in their collateral - either their investment property or commercial property - of 30-40%. Consumers who need quick access to financing to close on a property in as little as 2 weeks or less are good candidates for hard money. Consumers who do not meet conventional bank financing but have substantial equity in their property are good candidates for hard money

Collateral other than real estate? New Providence Capital is a first lien real estate lender however, we will look at other forms of collateral to enhance our loan to value ratio in some circumstances.
Why higher rates than banks? We quickly create loan opportunities for borrowers who are unable or unwilling to meet certain restrictive requirements of a bank. Cost of money is more expensive than a bank but much cheaper than a partner.

Why would anyone pay those rates? In a market where credit has all but evaporated, the access to capital is more important that the cost of capital. Partners are usually more expensive that utilizing a private money loan. On a typical repositioning deal the private money lender makes around 20 to 25% of the profits. A borrower can bring on a partner who gives him access to bank financing. Typically, that partner will require 25 to 50% of the profits. If the bank financing is 8% all in, then the borrower will be giving up somewhere between 33% and 58% of his profits in this scenario.

Process
How do I submit a loan? Fill out the Executive Summary from our forms online and fax to us and we will contact you within 24 hours.

What documents do you need to start the process? Once we have received your loan application, we will send out a term sheet if we are interested in pursuing your loan.

What upfront fees do you have? The term sheet will require application fee that covers the upfront cost of our due diligence on the loan.

How long does it take to fund? Once we have all of the documents required as part of our due diligence, it will usually take a couple weeks to fund.

Program Details
Where do you loan? Our target market for lending is the state of Texas and we only look at major metropolitan markets within the state. We do not look at rural property situations.

What property types do you lend on? Residential and Commercial properties including single family, townhouse, condominium, office, apartment, retail, and industrial.

What is your min/max loan amount? Our minimum loan amount is $200K and the maximum is generally $2M, but we do loans on an exception basis up to $5M.

What is your max LTV? 60% of the value of the property as determined by New Providence Capital.

What type of programs do you offer (interest only, term, etc.)? Our loans are interest only loans with a one to two year terms.

What are your rates? Our rate structure is between 12.99% -15% and the exact rate depends upon the quality of collateral and the borrower.

What is your minimum credit score? We do not have a minimum credit score, but we do look at borrower's credit reports and scores to see patterns of payment history.

Do you require inspections? We personally inspect every property that we loan against, and we will require an inspection if we feel there needs to be professional opinion concerning the physical condition of the property. We also require inspections prior to funding any construction draws.
Do you allow second liens? We do allow second liens. If so, what is the max CLTV? The maximum we would allow as a Combined Loan to Value including both the first and second liens would be 90%.

Can we close the loan in a corporation, LLC, etc.? We will allow a borrower to close in a single asset entity, provided we have a personal guaranty from the principal borrower in the transaction.

Can you lend to foreign nationals? Yes if their ownership is through a US entity.
Do you accrue interest? We typically require that interest is paid monthly on all of our loans.

Do you do refinances? We do many refinances.

Will you do cash out refinances? We will do cash out refinances, but our maximum loan to value is 50% for a cash out.

Underwriting/Evaluation
How do you value a property? We will look at recent comparable sales to the subject property, properties that have leased, properties that are available for sale, and properties that are available for rent. We will evaluate based upon the income approach and the sale approach. In some cases only one of the approaches may be valid for determining value.

I have an appraisal, can you use it? We will look at any appraisal that you might have, but if the appraisal does not utilize comparable sales within a 90 day window of closing, within a reasonable distance and relatively comparable properties, the appraisal may not be useful to us.

How do you value a non-cash flowing asset? We will look at the sale of comparable properties, as well as make assumptions of market rents, vacancy factors, expense ratios, etc. to determine a possible value.

What if the property does not cash flow? We are ok with properties that do not cash flow and we have closed many loans of this type.

What type of income verification do you require? We ask for income and assets on the borrower for all loans. For loans that are higher LTV%u2019s or loans that are more difficult to establish value, we may require additional borrower information. For properties that generate income, we ask for rent rolls and leases, and we may choose to interview tenants for confirmation.

Do you require a survey? Yes. We will accept an existing survey if there have not been any structural changes and our attorneys and title company will accept the survey.

Who orders the title commitment? We have a strong preference to use Fidelity Title Company in Dallas, Texas. Fidelity is a national firm and listed on the New York Stock Exchange.