Alternative Sources for Commercial Mortgage Loans
Trapped in a credit crunch, traditional lenders are unable or unwilling to make the volume of commercial mortgage loans that they once did, and have tightened qualifying standards significantly. Major financial markets are experiencing a lack of liquidity, and more investors are choosing to approach hard money lenders for funding on their deals. These hard money, or private, lenders have evolved into a mainstream resource for serious investors and offer many benefits. Private commercial mortgage loans can be funded in just a few days, as opposed to conventional loans where the process may wind on for months. There are less severe requirements for paperwork and documentation, with these lenders mainly concerned about the physical property: its equity, condition, repair and location. A solid cash-flow property gets their attention and consideration. The private lender might be simply a person with money to loan , or could be a hedge fund, portfolio lender or equity firm. Don’t discount any hard money resource with a preconceived notion of their ability to provide capital through commercial mortgage loans. Some of these private lenders have more readily available cash than many federally charted banks, and are ready to lend on solid deals with potential for high returns on their funds . Usually these private commercial mortgage loans are for short term, maturing in three years or less, which makes them ideal as a bridge loan while the borrower qualifies and closes a conventional loan. The hard money lender often will finance up to 70% of property value on a collateral property generating enough money to cover its own mortgage payments. The stronger the equity position in the property, the more positively the hard money lender will feel about the risk of the loan. High equity properties are always favored for commercial mortgage loans. Private lenders make independent decisions and have availablecash to loan, and an be the investor’s best choice for financing quickly and closing on their deal.
