Certain types of commercial financing are best left to hard money lending. Funding a real estate investment is the perfect example. But just as with traditional lenders, hard money lenders differ in their practices and procedures. So it is important not to assume that the first hard money lender you find is best suited to your needs.

It’s always in a borrower’s best interests to compare lenders. Furthermore, a key component in making comparisons is asking questions.

What kind of questions should borrowers ask? Here is a quick sample provided by Actium Lending out of Salt Lake City, Utah. Actium provides hard money and bridge loans throughout Utah as well as Colorado and Idaho.

1. What is your experience with the types of loan I need?

This first question is important because hard money lenders do not necessarily fund every need. Actium Lending prefers to focus on commercial real estate investments and a limited number of business needs. They don’t do things like fix-and-flip or construction loans.

The point is for the borrower to find a lender whose business model aligns with his financial goals. If borrower and lender are not on the same page, things will not work out well.

2. What are your terms, rates, and fees?

Questions about terms, rates, and fees are expected by every lender. These are the things that make lenders competitive. Here is the thing: a borrower cannot compare terms, rates, and fees if he doesn’t ask. It is also important to note that borrowers should never trust numbers published online. Published numbers are either averages or pertain only to a small number of highly favored borrowers.

3. How quickly can you underwrite and fund?

One of the big benefits of hard money is the speed at which lenders work. Borrowers working on time sensitive deals need to know what kind of speed they are looking at. Why? Because a lender may need five or six days while a borrower is looking to close in two or three. Again, the two need to be on the same page.

As a sidenote, Actium Lending has been known to underwrite and fund in as little as one business day. A couple of days is more typical, but a single business day is possible when circumstances warrant.

4. How do you structure your loans?

Borrowers should always ask lenders how their loans are structured. Most hard money loans are structured as interest-only loans. This means that the borrower makes monthly interest payments throughout the term. The final payment includes interest and the entire amount borrowed.

Note that there are exceptions to this rule. Lenders are free to structure their loans in any way they see fit. Some are not married to the interest-only model.

5. What documentation do you require?

Documentation requirements can have a significant impact on underwriting speed. Think of it this way: if a borrower can furnish all the required documents along with his loan application, there is no reason underwriting should drag on for weeks.

Maximizing speed dictates furnishing all required documents upfront. A borrower will not know what those documents are if he doesn’t ask. In addition, a lender may need documents he cannot furnish. Such requirements would suggest moving on to a new lender.

Hard money lenders can do things quite differently. That’s why it’s so important not to settle on the first lender who comes up in an online search. It is better to compare lenders, ask a lot of questions, and be absolutely sure before making a choice. It’s about due diligence, which is always a good thing.