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Sunday, October 8, 2017

Is One Commercial Lender Better Than Any Other?


4page_img5-bigWhen you venture out to seek funding for a commercial real estate project, the number of options can appear to be daunting. But which one is best for you? And is there really any difference between one commercial lender and any other?

In the commercial lending industry, there are a variety of sources of loans for borrowers, depending on a variety of factors, such as credit score, down payment size, property value and security collateral. Each type of commercial lender has different qualifications and benefits for their borrowers, which makes choosing the right type of lender highly subjective.

One type of commercial lender is a life insurance company. In fact, these lenders have the best rates and terms on the market. This, however, is most likely not going to fit the needs of any borrower with the exception of a very small few. Typically, receiving a loan from a life insurance company not only comes with a very large down payment (nearly half), but the loan is usually over $5 million. There are also very strict guidelines for the types of property that can be acquired with a loan from a life insurance company. If you manage to secure a loan, you are in a very good position for commercial real estate.

Another commercial lender with excellent terms are commercial mortgage-backed securities (CMBS). These lenders also deal with very large loan amounts and usually involve the purchase, building or renovating of multi-family housing units, offices spaces or large retail areas. CMBS lenders do not usually work with loans smaller than $3 million, but they are much more likely to deal with properties that need work, unlike life insurance companies.

One of the newest players in the commercial loan market are credit unions. Not only do they typically have better rates than commercial banks, but they are usually more localized and willing to work with business owners in the area. They have location restrictions on most of the properties that they are willing to finance and the loans that they grant have a tendency to be on the smaller side of commercial real estate (around $1 million).

The quickest type of commercial loan provided by a lender is a hard money loan. These are usually for much smaller amounts, but have a much higher interest rate. All things considered, however, they are much easier to qualify for and have much shorter repayment terms.

With all of the different types of loan and qualifications, how do I know which type of commercial lender is best for me?

The first thing to do is to start asking questions. If you are seeking a loan for a property, talk to lenders and figure out what will work best for you. It is better to spend some time figuring out where your property falls with a commercial lender than to apply for a loan that you will not receive. Or, even worse, to be granted a loan that doesn’t fit your needs and will end costing you in the end. Research requirements and the types of properties typically served by lenders in your area.

Dennis-Dahlberg-Mortgage-Broker-1_th

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
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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.

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