Understanding Commercial Hard Money Loans

Commercial Hard Money Loans Not Widely Understood

For commercial real estate investors who have always financed their properties at the bank, commercial hard money is not well understood. The requirements and pricing of commercial hard money loans is very different from bank loans. In fact, this is the reason that most commercial real estate investors don’t understand how commercial hard money loans work. Most of them have only ever gotten a bank loan in the past.

So how do commercial hard money loans differ from conventional financing? The requirements are the biggest difference between the two. For commercial hard money, it’s the information about the property itself that is the most important. Does the property produce income, or is it in good repair? For a bank, it’s the borrower’s credit and income that is the single biggest requirement. Most commercial hard money lenders will look at the borrower’s credit and income as secondary to the property.

Another way that commercial hard money loans differ from conventional financing is in the cost. A commercial hard money loan, also called a bridge loan, is more expensive than a bank loan. Interest rates and loan fees are higher. But for someone that isn’t eligible for bank financing, paying higher costs is better than not getting the financing at all.

 

Who Benefits From Commercial Hard Money Loans

Hard money loans are solutions for certain people in commercial real estate situations:

  • Low credit scores, but high loan to value ratio
  • If you have a had a bankruptcy in the last 7 years
  • If you need to close a deal quickly
  • Certain land heavy real estate deals
  • Unusual properties that don’t fit the usual bank profile for loan

Hard money loans can be a tremendous solution in many situations. Give us a call or use our contact form to find out how California Private Money Lenders can help you.

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