What You Need to Know About Commercial Lending Practices

Arizona Home Loan Staff Level 4 Funding Mortgage BrokersAre you looking to expand your current business by learning more about commercial lending? Then it is important to know about the policies and procedures that drive it.

There is a great deal of confusion surrounding the funding of small businesses. How do small companies stay ahead of demand for inventory? How are they able to maintain a staff when things get tight? What happens when a key piece of equipment breaks down and working capital will not cover the cost of a replacement? It is at this point of need where commercial lending steps in to help small business owners when expenses would otherwise drown them.

Typically, these lenders are not your traditional bank. They could vary from private lending agencies to collateral-based agencies that only deal in secured loans. One thing that they all have in common, however: they often have qualifications that are less strenuous and less strict than the traditional lending agencies.

There is a great deal of terminology surrounding commercial lending, but mostly it boils to one simple concept: this is money that is designed for small businesses to receive funding quickly and without all of the red tape of traditional lending institutions. Two of the most common terms that are used to describe various funding options are bridge loans and hard money. Bridge loans are also often termed short term financing, and they are relatively easy to qualify for, as long as there is equity put forth by the borrower. This, however, is also flexible as lenders will negotiate a lack of equity by using other creative methods such as lending to the borrower at a lower loan to value ratio. If equity is a problem, the lender will attempt to offset this risk by establishing a higher rate of return.

Another common term used in lending is hard money. These loans serve businesses that are willing to put assets, both personal and business related, forth as collateral against the loan. This usually results in higher interest rates and is often a last resort for businesses that are struggling to meet their obligations. While it is not common, hard money has also been sought by small business owners even in the face of a pending bankruptcy. In such situations, the lending agency relies heavily on the assets of the individual, as that is their only guarantee that the hard money will be recovered in case of a bankruptcy.

Have recent regulations affected the availability of bridge loans and hard money in commercial lending practices?

The regulations that have been put in place have actually allowed for a great deal of growth in the lending practices of various commercial agencies. While traditional banks have had to bend to guidelines that are far stricter, and made them less able to respond to the needs of the consumer, agencies that specialize in commercial lending are able to put together offers and packages that solve the problem of small businesses needing working capital while maintaining the integrity of the lending industry.


Dennis Mortgage Broker ArizonaDennis 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

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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.