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Getting a Hard Money Loan on Your Commercial Real Estate

Commercial real estate can be used as collateral to secure commercial hard money loans. Hard money loans are certainly easy to qualify provided the property (or assets) backing the loan provides enough of an equity cushion as risk protection for the lender making the loan. The entire underwriting process involved in the approval of a  loan by a hard money commercial lender is primarily based on the value of the assets to be used for securing the financing.

Save Time with a Hard Money Commercial Loan

It is not a stretch to say that traditional bank lending process is slow and involves presenting mounds of documents before reaching the closing table. Banks require various documents related to income, employment, credit history, income tax returns, rent rolls, lease agreements etc for processing a commercial real estate loan. Conventional commercial lenders expect their loan borrowers to have great credit history, qualifying credit scores, and documentable income. Many property owners may find it difficult to produce all the necessary documentation before the deadline for their need for funds. In such cases seeking out a hard money commercial loan is the only option.

Eligible properties

All commercial properties that have enough equity to back the loan are eligible for a commercial hard money loan. Apartment buildings (greater than five units), Condo developments, warehouses, industrial facilities, self storage facilities, mobile home parks, medical and hospital buildings, nursing homes and senior living quarters are just some of the commercial property types that can be  financed through a private investor loan.

Lending Guidelines

Borrowers who had been the through the experience getting a loan from a traditional bank will find the commercial hard money lender’s guidelines to be much simpler and reasonable. As commercial hard money is based primarily on the value of the property, other conventional lending requirements such as credit history and income documentation are relaxed. This accommodation of borrowers who wouldn’t otherwise be able to secure a real estate loan because of their low credit score, bankruptcy or late payments separates the underlying philosophy of hard money lending from the standard conventional bank’s commercial real estate lending guidelines.

Interest rates, Closing Fees, Points

The interest rates for commercial hard money loans range between 12 – 20% depending on the lender’s criteria and the borrower’s circumstances. The loan term of a hard money loan is commonly under 24 months. Lenders expect their funds to be paid back in time on schedule. Paying back before or at the end of loan duration can also help establish good rapport with the lender.

The closing fees charged by hard money lenders for commercial properties can be quite higher. Lenders do charges points and these can sometimes go all the way up to 6%. Borrower needs to negotiate all the terms of their loan as many private money investors will naturally try to maximize their returns by trying to increase rates and fees.

Commercial Hard Money Lenders in Your Locality

There are many private hard money lenders actively lending on commercial real estate in all regions of the country. It is best to ask for referrals from other property owners or investors in your area for a commercial hard money lender. If you can’t find one that way, you can always refer to ever growing directory of hard money lenders nationwide.

Establishing lasting relationships with lenders who understand your requirements and style of operations is a must for successful commercial real estate investing and finance.