Commercial real estate lenders come in many shapes and sizes. It is important to know the types of lenders that are available so that you can make the correct choice for who to work with for your real estate development funding needs.
Not all commercial real estate lenders are created equal. There are many different types that serve many different kinds of borrowers. They all have distinct requirements, timelines and terms, each offering their own specific benefits and drawbacks. Depending on your need as a borrower, certain enders may not be what you are looking for. Because of this, it is important to know the various types.
Banks – Perhaps the most recognizable and common, banks are very versatile commercial real estate lenders. They often have easy access to a great deal of funding. One of the strengths of using a bank for a commercial loan is that local banks are usually heavily invested in their local communities and seek to support small businesses. The problem with banks is that the application process is often quite extensive and takes a significant amount of time.
Life Insurance Companies – Obtaining a loan through a life insurance company is only available to those who are extremely well qualified because of their credit score. They offer the best terms and rates, but they are very difficult to obtain. With terms that often range for up to 30 years, these loans are an excellent bargain for a property investor who is highly qualified and has low risk.
Bond Market – These are often referred to as commercial mortgage-backed securities and are directly tied to other commercial real estate loans. They are handled by independent agencies, who minimize risk by sectioning off the loans. Lenders are then able to determine their level of risk by choosing which loans to obtain. For the most part, these loans are fairly stable and are a very common solution for borrowers that are not able to obtain loans from the more traditional outlets.
Debt Funds – Popular amongst commercial real estate lenders who specialize in construction, these loans are typically taken out by investing against other loans. There is often a higher rate, as the risk is greater, but for those who know what they are doing this is an excellent source of funding.
Government Entities – While the government does not specifically give out loans, they do assist traditional lenders by offering securities in order to drop rates and make it easier for lenders. However, this does not mean that these loans are easy to obtain. They must often meet strict requirements and apply only to certain aspects of commercial real estate investing. One such area is multi-family housing units.
With so many commercial real estate lenders, how will I know which is right for me?
It will depend entirely on the type of loan that you are looking for, the qualifications that you have and what you plan on doing with the loan. Knowing your goals and knowing your resources will help you narrow down which commercial real estate lenders will work best for you.
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.
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