A Traditional Commercial Mortgage Lender versus a Commercial Hard Money Lender

A traditional commercial mortgage loan is not always easy to attain. Fortunately, there are alternatives, and one of those is funding through a commercial loan from a hard money lender.

Since the subprime mortgage crisis, obtaining a commercial mortgage loan has been difficult at best and impossible at worst. Though the noose is loosening, its grip can still be felt in increased regulations, restrictions and requirements that make it difficult for the best of businesses to qualify. These types of commercial loans include SBA 7(a), CDC / SBA 504 loan, and traditional mortgage. Most of these types of loans require an established business presence, a credit score in the 700 plus range and experience in similar types of projects. Fortunately, there are alternatives. And one of the alternatives many businesses and real estate investors are turning to is hard money loans.

Hard money commercial mortgage loans are not just for those breaking into the business or individuals with credit scores below the 700 mark, they are also good for borrowers who are competing with all-cash buyers and need to move fast on a specific bid or project. Hard money loans close in as little as a few days compared to the one to two months that an average traditional lender takes, and prequalification takes as little as 24 hours. In some instances, investors will obtain a hard money loan in order to begin a project and will refinance to a long-term commercial loan at a later date.

A hard money lender uses the property’s collateral to secure the loan and not the borrower’s financial position. They are short term loans but can be extended up to 5 years. Questions that you want to be sure to ask a hard money lender include:

· Is there an exit fee or prepayment penalties? Many contractors and investors want to pay off the loan once a sale or traditional refinanced loan is in place.

· What is the late fee on a late balloon payment? Plans don’t always go as intended.

· What type of loan program is best suited for my needs? If you project is a quick turn-around such as a fix and flip, you and your company may be better suited for a bridge loan. An experienced hard money lender will know what loan is best for what you have in mind.

What are Commercial Mortgage Loans used for?

As their name implies, these types of loans are used for commercial real estate properties. The various groups or types of buildings include multifamily, office, retail, industrial, hospitality, healthcare and miscellaneous such as storage. With increased demand resulting in higher rents and occupancy rates, multifamily units, the most common of which is an apartment, are a hot item among real estate investors in today’s market.

Be sure you are working with a lender that has your best interest at heart. This is a relationship you will want to maintain for years as you grow your portfolio.

At Level 4 Funding, we will not only help you close one deal, but grow your portfolio as well. We are invested in you as a client and want your success. Our rapid, streamlined approach helps keep you on track and your business on the path to success.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.