Commercial Loan Financing

In the world of real estate development, there are very few hard and fast rules. With commercial loan financing, there are number of areas that allow for borrowers and lenders alike to be able to craft the terms of such a loan to their own best interests.

Knowing how to properly negotiate a loan will not only save a borrower a tremendous amount of stress and angst, but it also has the potential to save a borrower quite a bit of money. Commercial loan financing is all about risk and reward. The first thing to keep in mind when dealing with potential lenders is that a borrower is the customer, but they must also be worth the time of the lender.

Lenders do not deal with borrowers who are not prepared and do not have clear goals, as well as a plan, in mind. Commercial loan financing is not a game for the unprepared or the irresponsible and a potential borrower will do well to understand that, while lenders want your business, they have little time for futility or disorganization. That being said, if you show yourself to be well prepared and ready to deal with the rigors of real estate investment, then lenders will welcome your business. If there is one thing that lenders love, it is a knowledgeable, easy borrower. It means less work for them and they are still able to claim their commission.

There are a number of points of negotiation that a borrower can hit upon with lenders that specialize in commercial loan financing. The first is the interest rate. This is especially true for borrowers that are very well qualified. Lenders will be especially keen to want your business if you have a high credit score and an excellent track record with loans. This gives you a tremendous amount of power to attempt to negotiate an interest rate that will work well for you and for your long-term business plan.

Another point of negotiation is the closing costs associated with the commercial loan financing. These are very commonly negotiated, as they are commonly not a part of the loan itself. They can amount to quite a bit of money, however, and it is usually taken directly out of the pocket of the borrower, rather rolled into the amount of the loan. A savvy borrower will be able to negotiate these fees down, or possibly eliminate them altogether. This same tactic also applies to other fees and costs that are associated with the processing of the loan. At the very least, a well-qualified borrower will be able to get all of the costs rolled into the amount of the overall loan.

What are some questions that a borrower could ask about commercial loan financing?

One key element of commercial loan financing is what happens if a borrower is able to pay off the loan ahead of time. If this is part of your plan, you will most definitely want to know the conditions under which you are able to do so. Many lenders have various penalties and fees that are associated with prepayment, but they are always up for negotiation. If you have a solid plan and truly believe that you are able to pay the commercial loan financing off early, then use those terms as a point of negotiation.

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

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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Building Loan

If you are interested in widening your real estate portfolio, there is a good chance that you are not able to float the entire cost of such an investment on your own. This is where you will need a commercial building loan to help you cover the costs of the property and turn it in to a revenue generating investment.

Very few individuals or businesses are able to handle the massive amount of funds that are necessary to take advantage of a hot tip. It is also unlikely, if you are operating a business that has payroll, operating expenses and a steady need for cashflow, that you are able to set aside enough to cover the expense of renovations to existing properties. This is where a commercial building loan comes in to assist borrowers.

These loans are often used to provide the necessary capital to make large improvements to the property or the equipment of a business in order to increase the revenue stream. Typically, these loans are not used to purchase new property, although there are always exceptions to the rule. For the most part, a commercial building loan is used to improve an existing business in order to increase the revenue stream. In this way, the borrower is able to quickly pay back the loan. Ideally, the increase in capital from the improvements will be almost immediately evident and will enable to borrower to also quickly pay back the loan.

While there are many different sets of terms and interest rates, depending on the lender and the unique circumstances of the borrower, there are a handful of standard practices that you are likely to encounter if you are looking for a commercial building loan. One of these is the terms of payment. It is fair to expect that you, as a borrower, will face a large balloon payment at the end of the loan. Unlike a residential mortgage, this is a standard practice with commercial loans. This might seem daunting until you realize that the purpose of such a loan is to generate revenue quickly. The loan should also help facilitate an increase in the bottom line of the borrower, especially with properties that are tied to rentals, as the renovations should increase the value of the property.

What are the drawbacks of a commercial building loan?

One of the biggest drawbacks is that an investor has no control over many of the factors that determine a borrower’s ability to pay back the loan. While they are absolutely necessary in order to expand an operating business by way of renovations and improvements, there is always a risk involved when borrowing such large sums of money. Anyone who says that it is a guaranteed investment is either stupid or a liar. That being said, there are a number of things that a borrower can do to minimize their risk. Being organized, doing your research and being realistic with your planning are all steps that can be taken to ensure that your commercial building loan is effective and responsible.

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

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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Bridge Loan

If a business is not in a place financially to obtain funding, but still needs access to funds for a project or for operations, they might apply for a bridge loan. As the name implies, these loans are designed to be very short term and are there to help small businesses with immediate access to funds.

Because of the speed and requirements of traditional lending agencies, there arose a need for funding that was available in a much more condensed time frame with fewer requirements. Bridge loans fill this need. They are not only very flexible, but the terms of the loan are very short, giving both the borrower and the lender exactly what they need.

Typically, small businesses will utilize a bridge loan to cover the expenses that are incurred while they are waiting for the greater funding of a traditional loan to come through. For real estate, this might include the fees, assessment and appraisals of various properties that are in the pipeline for development. These loans allow for the maintenance of cash flow while larger funding is still in process. Some businesses have used these loans to cover rent, payroll or other operations expenses to maintain their operations while other funding is pending.

The ease of accessibility of these loans does not come without a cost, however, as the interest rates are typically much larger than that of a traditional loan. This only makes sense when you consider the level of risk that a lender is undertaking by providing the funding in such a matter. There is not much security outside of the value of the property. In this way, bridge loans are very similar to hard money loans, although their intended purpose is different.

One of the strategies that many borrowers employ is actually to roll the cost of the bridge loan into the overall cost of the larger traditional loan. This allows the borrower to pay back the loan immediately upon the receipt of the larger loan. This, essentially, rolls both loans into one payment and is a fairly standard tactic. Most lenders understand the need to do that and are willing to work with borrowers to ensure a smooth transition. If you are a borrower that is in bind while waiting for funding, make sure that you explore all of the options that are available to you. Your lender might even have some ideas about how you can creative leverage these loans.

Are there any other uses for a bridge loan other than real estate?

Yes, absolutely. Many operating businesses use bridge loans to cover the operational costs of doing business while they are waiting on large contracts or massive amounts of funding. While this could be a risky venture if financing falls through, it is a safe assumption that businesses who are going to use the quick funds of a loan of this type can count on their source of funding to not fail. At this point, the elevated interest payments are a much more acceptable loss than having to shut down operations.

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

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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Lending

At it’s very core, a commercial loan is a business arrangement that is used to fund major purchases or improvements, typically in the real estate sector. Commercial lending specializes in large project that businesses or individuals could not afford to handle financially on their own.

While there are a variety reasons for a borrower to seek out funding through commercial lending, they all have one thing in common. These loans exist to help businesses, whether in real estate or any other field, bridge the gap between operational expenses and increased profit potential. Many small business owners have effectively used this source of funding to leverage their businesses into another level of productivity and profit.

There is a certain level of risk that is associated with commercial lending, on behalf of both the lender and the borrower. With the loan amounts being very large, there is always the potential for some sort of unforeseen circumstance to scramble the best laid plans of even the most qualified lenders. There are many factors that might have an impact on the success of a commercial venture, especially in real estate. Natural disasters, the overall state of the economy and political fallout are all large influences in the success of businesses and all of them are outside of the control of either the borrower or the lender. However, there are ways to minimize the risk so that both lenders and borrowers can steer clear of catastrophe.

Obtaining a loan through commercial lending can be a very time consuming and extensive process. This is very much on purpose, on behalf of the lenders. After all, they are going to be giving the borrower a substantial amount of money and they will need to make sure that their investment is a good one. For traditional loans, the creditworthiness of the borrower is critical. This will immediately let lenders know whether or not the borrower is a risk. If the borrower is determined to be a risk, this does not necessarily mean that they will not be able to obtain funding, but if they do, it will be at a higher interest rate and will most likely have additional requirements. In addition to this, the business that is applying for the funding will have to provide a substantial amount of financial documentation to establish the health of the business. This will most likely include balance sheets, bank statements and tax returns. Depending on the lender, the primary business owner might also have to provide this information about their personal finances.

Are borrowers able to obtain loans through commercial lending multiple times?

Each loan is considered a separate process and procedure, so it is likely that a small business will consistently have a loan floating on their books. However, each loan takes into account the borrowers credit, so multiple inquiries have the potential to hinder further efforts. It is also possible for borrower to renew their loan. Depending on the commercial lending agency, the borrower may be able to roll their loan into a new option for financing. Usually this will offer better interest rates and terms, as the borrower will have established themselves as a lower risk with the lending institution. Assuming, of course, that the borrower responsibly handled the first loan.

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

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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Hard Money Commercial Loans

When traditional loans are unavailable or will take too long to complete, hard money commercial loans will often suit the needs of borrowers quite nicely. Because they are easier to obtain for borrowers who do not qualify for traditional loans because of their credit, these loans are often an excellent short-term solution.

If you are a commercial developer and have recently hit a rough patch in terms of your personal or business credit, it is still very possible to obtain a loan to improve your properties or even purchase new ones. Hard money commercial loans have been filling in the gaps where traditional lending outlets have been failing.

These loans are typically financed at a higher interest rate, but they also have much lower requirements than traditional lender. Often, they do not even require the borrower to be credit worthy at all. Instead, the lenders will look at the value of the property itself. The lender will use the value of a potential resale of your commercial property as security toward the loan. That way, if something were to go wrong with the hard money commercial loan, they know that they could at least recuperate some of their investment by selling your property.

Another important aspect of these loans is that they are typically much shorter terms than a traditional loan. While the exact timeline of each loan is going to be different, and up for negotiation with the lender, most hard money commercial loans fall under three years. The most common timeframe, however, is right around a year. For smart developers, this is plenty of time to put that money to use, turn a profit and quickly pay it back. When done correctly, using a commercial loan in this way is essentially using someone else’s money to boost your revenue stream.

One characteristic of a loan of this type is the large balloon payment that is due at the end of the term. Many commercial loans offer terms that will allow a borrower to only pay interest during the term of the loan, with the balance then being due in full in one large payment at the end of the term. This allows for a borrower to utilize the entire amount of the loan and gives the borrower plenty of time to increase their revenue stream to cover the expense further down the road. However, this has the potential to be dangerous is the borrower runs into trouble.

What are the benefits of hard money commercial loans to the borrower?

Even though you are going to pay more in interest with a loan of this type, the true strength of it lies in the speed at which it is available, as well as the ease of securing one for all types of borrowers. While traditional loans can take weeks or months to acquire, hard money commercial loans can often be settled within a week. This allows for borrowers to be able to capitalize on opportunities that arise or to quickly access funds for the improvement of a property.

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

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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Real Estate Interest Rates

Much like residential mortgage rates, commercial real estate interest rates have a great deal of variety depending on a number of factors. Knowing how interest rates are calculated, and what can impact them, will help you to make informed decisions as a borrower.

Although each lender is different, there are some common factors that go into determining commercial real estate interest rates.

One of the biggest questions that a borrower must ask when consulting with a lender is whether an interest rate is fixed or variable. A fixed interest rate does not change from month to month. It remains the same for the entire life of the loan. This will remain the case, even if the interest rate falls below the interest rate that was agreed upon. Commercial real estate interest rates that are fixed are very difficult to acquire because the lender wants to optimize their potential profit as well. Because of the size of commercial loans, lenders will often only extend a fixed rate term to a long-standing client or a borrower that is extremely well qualified in the credit area.

A variable rate loan can rise or fall past the initial interest rate. These types of commercial real estate interest rates are by far the most common. They can also cause a great deal of anxiety amongst borrowers, as monthly payments rise and fall based on market factors, instead of anything in the control of the borrower. If a borrower does have a loan that has a variable interest rate, it is crucial to understand how the interest rate is determined and what the borrower can do to affect it. In most cases, there is nothing that the borrower can do, as the interest rate is based on the prime rate that is set by the federal government. The government sets this rate based on the strength and speed of the national economy as a whole.

A borrower does have the potential to get incredibly lucky and have the interest rate drop during the term of the commercial loan. Having such a windfall has the potential to save a borrower several thousand dollars. However, this should not only not be planned for, but it should be assumed that it is not going to be the case. It is far more likely that commercial real estate interest rates will rise, even if just slightly.

What determines commercial real estate interest rates?

First and foremost, interest rates are based on the prime rate. With this as a base, lenders are free to add “points” to the interest rate. These points translate directly to interest rate percentage point increases. Depending on the creditworthiness of the borrower, or the amount of collateral and security that they are willing to put down, the number of points can vary. It is important to remember, however, that lenders want borrowers to choose them. Because of this, it is not very likely that the interest rates will be that extraordinary or unrealistic. Commercial real estate interest rates are very dependent on the qualifications of the borrower.

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

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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Real Estate Loan Terms

If you are trying to decide between various loans from different lenders, there are bound to be different terms to compare. When deciding what loan is going to be the best for you, understanding commercial real estate loan terms will help you plan far into the future.

Understanding the various conditions of your real estate loan will not only alleviate a lot of the stress of planning for repayment and usage of your loan, but it will also help you choose the options that are going to be the best for your specific real estate needs. While each loan is going to have unique factors and terms, there are some basic things to understand about commercial real estate loan terms.

The first thing to understand is that the condition of the borrower will greatly impact the terms of the loan. This is especially true for more traditional lenders. As a general rule, if the borrower presents a higher level of risk to the lender, then the commercial real estate loan terms will be much more in the interest of the lender. Such issues could be less than stellar credit, or not much collateral to bring to the table to secure the loan. It only makes sense. Lenders want to make sure that the terms are in their favor so that they are able to gather some sort of return on their investment with the loan. A lack of any sort of record for the repayment of outstanding debt could also affect the terms, as lenders do not know what to expect from potential borrowers, in this case.

Another aspect of commercial real estate loan terms that can greatly impact a borrower and future plans is the length of the loan itself. While there are many options for extremely short terms loans that are designed for flipping properties or quick influxes of cash to generate massive returns on revenue, the majority of loans are geared toward longer lengths, although not as long as a residential mortgage. Usually they can be as short as 5 years and as long as 30, but they typically fall in the 10 to 20-year range. But the key to understanding your loan here is to understand how it is amortized.

Unlike residential loans, many commercial real estate loan terms will state an amortization period of longer than the actual repayment term of the loan. Typically, a commercial loan will have a standard payment period for the first portion of the loan and then end with a large payment that will take care of the balance of the loan, often called a balloon payment. Let’s say, for example, that your loan is for 10 years, but is amortized over a term of 20 years. This means that you will make payments for 10 years as if you were going to be holding the loan for 20 years (in terms of the interest and amortization). However, after the 10-year term is up, you will be responsible for the entire remaining balance in one payment.

How are commercial real estate loan terms beneficial to borrowers?

Even though they might seem daunting, commercial real estate loan terms allow borrowers to take leaps that they would not otherwise be able to. If used correctly, these loans will help borrowers to acquire properties and turn them into income generating investments.

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

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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage