Commercial Hard Money Loans
By G. David Lapin On July 14 2023
Alternative Financing To Consider When SBA Is Not A Viable Option
Commercial hard money loans and private money hard money loans are both alternative financing options to consider when traditional avenues like SBA financing may not be available or suitable for your needs. These types of loans are typically provided by private beneficiaries or private lenders and are secured by real estate.
In California, there are several hard money lending sources who offer commercial hard money loans. These loans are often used by borrowers who may not qualify for traditional bank loans due to factors such as low credit scores, limited financial history, property type or the need for quick funding. Private lending are generally more flexible in their lending criteria and can provide faster approval and funding compared to traditional banks.
Here are a few key points to understand about commercial hard money loans and private money hard money loans in California:
Collateral: Hard money loans are asset-based loans, meaning they are secured by collateral such as real estate or other valuable assets. The collateral serves as security for the lender in case the borrower defaults on the loan.
Loan-to-Value (LTV) Ratio: Hard money lending typically offer loans based on the value of the collateral, expressed as a percentage of the property's appraised value. The LTV ratio for commercial hard money loans in California can range from 50% to 65% or higher, depending on the underwriter and the specific circumstances.
Interest Rates and Fees: Hard money loans often come with higher interest rates compared to traditional bank loans. Interest rates for commercial hard money loans in California can range from 8% to 12% or more, depending on the lending source, borrower's creditworthiness, and the specific property. Additionally, hard money loans may include origination fees and other associated costs.
Loan Terms: Hard money loans are typically short-term loans, with loan terms ranging from a few months to a few years. The repayment schedule may involve interest-only payments during the loan term, with a balloon payment of the principal at the end. However, loan terms can be negotiated with the lending compnay to meet your specific needs.
Speed and Flexibility: One of the main advantages of hard money loans is the speed of funding. Private lending companies can often provide quick approvals and funding within days or weeks, allowing borrowers to take advantage of time-sensitive opportunities. Additionally, private lending is generally more flexible in their lending criteria and can consider factors beyond credit scores, such as the potential value of the investment property.
Before pursuing a commercial hard money loan or private money hard money loan, it's important to thoroughly research and evaluate different lending options. Consider experience, interest rates, fees, loan terms they provide. Working with a experienced lending source that understanfs the subject property will help ensure a smooth borrowing experience and increase your chances of securing the financing you need to meet your long and short term real estate goals.