Traditional commercial real estate loans offer low financing rates to well-qualified individuals and projects seeking capital to buy, re-finance or place a lien on existing commercial property. The property types can range from hotels, restaurants, casinos and apartments to office buildings, factories, and even private homes held in commercial trusts or estates. With any of these property types, financing through banks or traditional lenders can be both lengthy and require a great deal of credit history and supportive income.
If a borrower cannot meet these high standards, other options are available in a field commonly known as "hard money". In hard money, less qualified borrowers can find lenders with higher rates who are willing to accept greater risk. These lenders are also prepared to finance within a few weeks of receiving a loan application, meaning that deals which cannot wait for conventional financing can be completed as well.
Hard money is also known as a "bridge loan" because it is most often used to finance the gaps between the need for a deal to get done and the convetional, low interest-rate financing. While conventional rates hover between 6-7%, bridge loans can cost as much as 12-16% based on risk factors. This sharp increase isn't usually felt for long by most borrowers, who typically re-finance within 12-24 months of receiving the alternative financing.
Finding a hard money lender can be a daunting task. Several good directory lists exist on the web, but many companies in the largely unregulated field have been accused of scamming potential customers and accepting upfront fees for loans they never intended to fund. With these practices widespread, it is best to ask around the commercial industry to find a borrower that will fit your needs.
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