Learn To Be A Fix and Flip Investor: March 2018

Saturday, March 31, 2018

Learn How to Select Hard Money Lenders

For many borrowers working with hard money lenders is a new concept. Borrowers are not familiar with the process or how to select a good lender.

Many borrowers are facing the challenge of less than perfect credit or a low credit score. And sadly, these people are under the assumption that they have not alternative to traditional lenders and banks. They are unaware of the service which is provided by hard money lenders. Though these loans are called non-traditional, they are still a very viable option for anyone who is unable to qualify for a traditional loan. But it is critical that a borrower learn how to select a good private lender to work with.

The first step might sound overly simplified but it is valid. Select a firm or individual who specializes in lending hard money. This ensures that you are working with a knowledgeable lender and one who can offer you terms which will fully meet your needs. You can learn a great deal about a lender by reading comments from other borrowers and investigating the lenders reputation. Any reputable lender will do what is best for his or her clients.

If you are new to private lending, it will also be helpful to limit your search to local resources. Working in-person will allow you to ask questions and establish a good working relationship with the lender as you learn the processes and intricacies of hard money. In addition, it will be much easier for you to check out the licensing information for local hard money lenders. This is an important step that should never be overlooked even if the firm is large and appears to be well known.

Seek Openness

As with any business, there will be certain privileged or proprietary information that the lender might not be willing to share with you. But all parties should have access to the loan information during the origination process. Be sure that your lender is willing to provide this transparency and that you are not getting a higher rate than originally promised. As you invest more time in speaking to the lender, you should not feel like some questions are being skirted or that there are aspects of the loan process the lender is not willing to discuss fully and openly.

Due Diligence Pay Dividends

Learning any new process takes time and effort. And working with hard money lenders is no different. You need to be willing to invest your time in learning the process as well as getting to know the lenders. Working with local lenders allows for a shorter learning curve and also gives you more peace of mind as you have been able to actually meet the lender and their staff. As you progress into more loans, seeking national lenders is a viable option to increase your opportunities and to locate more diverse loan options and offers. Be certain to carefully evaluate all of the lenders and all of the loan offers that you receive. Look for a lender who you feel comfortable working with and find very trustworthy.

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

How to Qualify for Commercial Real Estate Loans

Understand that commercial real estate loans are nothing like residential loans, which means that the qualifications are drastically different as well. Understanding the qualifications before you apply for a loan is critical to securing the fund that you need.

First, it is important to grasp that commercial real estate loans and residential real estate loans have nothing really in common other than the word loans. The comparison is similar to that of a paper airplane and a jumbo jet; yes they both fly. So be prepared to learn about an entirely new set of loan qualifications before you embark on your first commercial loan application.

Lenders base a huge portion of their decision on your personal credit score when you are seeking a residential loan. And it is always good to have a respectable credit score, but it is not as critical when seeking a commercial loan. A credit score of below 600 will require an explanation but it is not a deal breaker. But a credit score of under 500 is likely to reduce your opportunities quite a bit. What lenders will be looking for to approve commercial real estate loans is a solid net worth. In general, lenders would like to see a net worth equal to the amount of the loan you are requesting.

Another important factor to qualify for commercial real estate loans is liquidity. The standard for liquidity varies among lenders but the rough average is 10-20% of the loan amount. What lenders don’t want to see is a borrower who scrapes up every last dollar that they have to make a down payment. Being cash poor could have catastrophic results if there is an unexpected expense which arises or some other type of emergency.

Your Experience

Your experience will also be a key factor in your approval. Demonstrating that you have the ability to manage the new property successfully means that you are most likely going to be able to make you payments on time and for the life of the loan. And if the property is quite large, the lender wants to know that you have the resources and staff in place to handle the management and ownership responsibilities associated with the property.

Income

As with any loan, there is a certain expectation for income. You need to have the income to pay the loan payment each month. This might be in the form of rental income once the property is up and functioning or it could be revenue from the business which is housed on the property, but the cash flow needs to be there to make the payments. Unlike on a residential loan, there is not real ratio such as debt to income that the industry uses as a standard. But you do need to demonstrate that there will be some type of cash flow to cover the loan payments for the life of the loan. All of these factors are blended to determine your ability to make the monthly payments on the loan that you are requesting unlike in a residential loan application where most of the weight rests on your income alone.

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How to Benefit From Hard Money Loans

Though many borrowers are unfamiliar with the concept, hard money loans offer many benefits to certain borrowers. Understanding how these loans work can make them a great financial tool to have at your disposal.)

Hard money loans are simply short term loans which are secured by real estate. The loans are often referred to as non-conventional as they are provided by private lenders rather than traditional lenders or banks. Unlike the more traditional loans offered by banks, there are much less stringent requirements to qualify for these private loans. This is one of the main reasons that many borrowers elect to use a private lender and hard money.

As a rule, private hard money is seen as a faster and less difficult solution for many real estate investors. With less documentation required for the application, not only is this a less stressful process for the borrower but it is also faster for the lender. For these types of loans, the lender is primarily interested in the value of the property which is going to be used as the collateral on the loan and not the borrower’s financial health. So rather than spending days or weeks verifying credit history and credit reports, the lender is only seeking the current market value of that one property. If the loan amount is less than 70% of the property value then the lender is most likely ready to draw up the agreement and fund the loan.

Who Benefits from Hard Money Loans?

There are four main ways that hard money loans can be used to a great benefit for borrowers. The first is in the case of flippers. This is an investor who is buying a house that needs work and will be completing a renovation with the intent of selling the property for a profit and in a very short time. A private loan is much faster and easier for this process. Builders will also use this type of loan to purchase a lot to build on. Once the structure is complete, they sell it and pay off the private lender with the profit from the sale. Investors also favor a private loan when they are in need of funding very quickly. Opportunities can be very time sensitive and making the initial purchase using a private loan is much faster. Then the investor has the option of securing a traditional loan to lower their interest costs once they have ownership of the property.

A Final Benefactor

The last type of situation which can require a private loan of this nature is a person who has bad credit. There are occasions when a person has saved enough for the down payment on a property but is still unable to secure a traditional loan for the purchase. Their credit is too bad or they have no credit history. In this case, they can use the private lender to secure the property and then refinance later when they are able to qualify for a traditional loan. All of these situations are clearly good options to take advantage of an opportunity that would otherwise be lost.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

How to Evaluate Hard Money Lenders

Selecting hard money lenders is very much like finding any other service provider to work with. The success of your loan and business relationship relies on your due diligence.

It can be very easy to get nervous when you are looking for a lender of any type. After all, you are going to ask this person or institution for money and that just makes most people uncomfortable and nervous. But the key to a successful search for conventional lenders or hard money lenders is remembering that you are their customer and that they are in business to offer you a service. Even if you are seeking a private lender because you have been rejected by a traditional bank, do not rush to accept the first loan offer that you get.

Start your search in the same manner that most of the world uses to find anything, the Internet. Does the lender have a legitimate website? Some websites are simply portals which are gathering information and then sending it off to potential lenders. This is not what you are looking for. A legitimate private lender will have a professional site which will provide you with contact information, general information about the lender, information about the type and size of the loans that they offer and their criteria for lending.

Once you have compiled a list of hard money lenders that you would like to speak to, take an additional step and check them out further. Search to see if they have any litigation pending against them or if there are issues pending with any investors which they might have. In some cases you can also learn what other borrowers have said by doing a google search of each lender. There are numerous sites where consumers report poor service or poor business practices by just about any service provider that you can think of.

As long as you have not uncovered any red flags, then contact each lender to set up an appointment to speak in person or a call if they are not local. At this time it is a good idea to have prepared a list of questions to ask each lender. These answers will allow you to compare each lender on the same criteria. You might ask what type of loans they most often fund or what dollar amount is their average loan. You will also want to inquire about their time frame for funding the request and their criteria for approval of the loan request.

Once you have gathered all of your information, you will want to calculate the total cost of each loan offer. Be sure to consider loan origination or processing fees and any other fees such as an early repayment penalty. This total cost should be your main criteria for selecting any hard money lenders. If you have two lenders who’s offers are the same then you can use more personal characteristics in your decision making process such as who you think will be the easiest to work with or who is located closer for more easy access. But be mindful of cost and the fact that you are going to be the customer.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Friday, March 30, 2018

How to Find the Right Commercial Real Estate Loans Online

Level 4 Funding explains simple ways to find the right commercial real estate loans… all from your computer. Read on to find out the key ways to choose the right online lender.)

It’s easier than ever to obtain things today. No more running out to the store for clothing, furniture, even groceries can be delivered right to your door! Practically anything you need or want is available at your fingertips and is just a mouse click away! Even when it comes to finding commercial real estate loans, you can turn to the trusty Internet to help you find exactly what you need.

While there are so many options and ways to obtain commercial real estate loans, the process can be started and even finished online. Via the Internet you can do a great deal of research about various loan types, the specialty type that might be best for your business, and even the application process. It can all be done online! However, it’s important to note that oftentimes, these virtual lending outlets may come with a higher interest rate to account for the risk factor. However, getting a loan without leaving your home is just so convenient, that the higher interest rate might just be worth it!

When you are looking for loans online, start at an online marketplace lender. These lenders allow borrowers the opportunity to obtain loans through online platforms. They are also more lenient for those that have less than desirable credit scores, dings on their credit history or who are just starting to establish a credit history for their business. The entire process happens online, so from the sourcing, underwriting, and services to the loan, then through the Internet, your loan is marketed to investors to receive funding. It’s fair to say that most online marketplace lenders are in the realm of short-term loans. However, that’s not to rule out obtaining long-term loans online, its just not as common.

Consider the many benefits of using an online marketplace lender.

Trying to get a loan in pajamas has to be the number one benefit! All kidding aside, the convenience factor is a big plus. However, the online marketplace does offer additional advantages for borrowers. The process is very smooth and efficient. So from the time you apply to the time you get approved (and get cash in hand) is quick and easy! It’s also ideal for high-risk borrowers that have previously been rejected by conventional lenders. Whether or not your loan is approved, there is not a long waiting period in which to find out.

While there are some benefits, there are also some drawbacks when it comes to obtaining commercial real estate loans via the Internet.

It’s important to note that these types of loans may be considered higher risk to lenders. And to ensure they cover their assets, borrowers will generally have to deal with higher interest rates to compensate for lenders’ risk. In addition to higher interest rates, there may be some costs, fees and other monies owned so it’s important to read all the fine print. If you have questions, see if the company has a live chat option or put in a call. You never want to go with a company that is unreachable. There are pros and cons to all things, so as long as you weigh your options and the goods outweigh the bads, finding a loan via the online marketplace can be a win-win solution!

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Why Understanding the Basics Helps to Avoid Red Flags on Commercial Loans

Applying for commercial loans is normally a long process. It is important to avoid raising red flags to keep the process as stream lined as possible.

Understanding the basics of commercial loans is critical to completing a loan application correctly and not raising unnecessary red flags which will slow down or stop the application evaluation process. Most commercial loans are offered for between 5 and 10 years but the amortization period is up to 25 years. Requesting a loan for a longer period of time is not normally an option but can indicate to lenders that you might be concerned about your ability to pay the loan in full in the allotted time frame. A standard down payment of 20% to 25% is expected on commercial loans. Again, this is a fairly non-negotiable fact as is a loan to value ratio of 80% or less.

One of the first red flags that a borrower can trigger is by demanding an unreasonably fast loan approval process. Some loans and lenders require 90 days or more to process and fund a loan. In a best case, it will require at least 6 weeks to process a loan application even if you have previously worked with the lender and been successfully awarded funds. An experienced and confident borrower knows the timeframe involved and has planned accordingly. Trying to rush the process indicates either inexperience which could jeopardize your approval or that your financial situation is about to change and you want to get approved before your creditworthiness drops.

Another red flag jumps out if you appear to be withholding information or are intentionally providing vague answers. A lag in response time might not be because you are trying to hide information but even if it is because you are not well prepared or are disorganized, the result is still a negative mark against you. Requiring continued requests for the same information is not going to make the lender bored and cause them to stop asking. It is going to make them worried or more curious and they are going to dig even deeper to find the reason for your secrecy.

Be Realistic

Finally, requesting a loan which is in excess of the 80% loan to value standard is going to create unneeded issues. The first thought is that you have not completed you due diligence and you are unaware of the actual property value. This makes you look ill prepared and unprofessional. The other thought is that you are simply disregarding the standards set by the industry. This makes you appear to be unrealistic and also self-absorbed as if the rules do not apply to you. Neither of these will create a positive image for you with the lender.

Avoid Any Unnecessary Issues

Most commercial lenders adhere fairly closely to the industry standards for loan terms. Understanding these terms and being realistic with your request will keep the process moving at or ahead of the average pace. But trying to rush or refusing to honestly answer legitimate questions posed by the lender will only cause unnecessary questioning of your business and financial stability which could eliminate your chance of securing a loan.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Thursday, March 29, 2018

Commercial Lenders

Before you go in search of your first commercial lender, you need to determine just which sector of this lucrative investment strategy you are going to invest in. Let’s look at one of the most popular CRE investments—offices—and find out what’s hot for 2018 and where savvy investors are plunking down their chunk of change in order to increase their ROI.

And once you’ve developed a plan, stick to it. Many an investor has let their limbic system, the emotional overriding component of their brain, waylay them from their chosen investment strategy. So, let’s take a look at offices and see if this might just be the CRE investment strategy that you’ve been looking for.

The office building asset class accounts for about 20 percent of the total CRE market. This segment of the market can be volatile, so it’s important to know just what to look for in this arena. The overall economy is an important consideration as well as the projected job growth when choosing a particular market. Look for a declining vacancy rate and a rising absorption rate. Include the surrounding communities in your assessment as they will have a strong impact on your strategy and market. According to Statista, vacancy rates in office space are forecasted to decline from 12.9 percent in Q4 2017 to 12 percent in Q2 2019. In the first quarter of 2017, office space beat out every other segment in commercial construction starts including retail, warehouse, hotels, amusement and parking garages with a whopping 6.6 billion.

Office assets are usually assigned a quality rating, similar to multifamily units. Their standards can vary depending on the local market, but will be important to your commercial lender.

· Class A: These high-end properties are usually recently built or extensively remodeled. They usually have high visibility and are within easy access to major amenities. Core focused REIT and pension funds tend to veer towards this type of office investment.

· Class B: These are usually older buildings that may require some minor renovation. These are fairly popular among commercial lenders, particularly turn-around investors and private equity groups.

· Class C: These generally require some major capital investment for improvements. They are also not in very desirable locations and are typically used for redevelopment opportunities.

And just what cities have the highest rents? Hong Kong is king with a price of $255.50 per square foot. New York City comes in second with a price of $153, San Francisco in fifth with $105 and Los Angeles edging into 10^th place with a price of $73.

Co-Working Spaces is a growing consideration in this market.

While this type of office space was once considered the go-to for freelancers and small corps, times have changed. Big businesses are using this type of workspace in order to get their feet wet in a community before relocating. According to U.S. News, CBRE reported that co-working in America is experiencing an approximate five-year compound average annual growth rate of 21 percent.

Some investors are turning to REITs in order to get into this segment of CRE. Both Vornado Realty Trust and Boston Properties include co-working in their portfolio.

There are alternative commercial lenders who can help you get the funds you need for your project. At Level 4 Funding, providing capital for office projects is one of our specialties. We offer loans up to $50 million, 90 percent LTV, competitive loan rates and quick funding. Call us for a no-obligation quote.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Real Estate Lenders

Shopping malls are turning into mixed-use developments and online shopping has increased the demand for distribution centers. Investors in this segment are looking for commercial real estate lenders that are familiar with this segment of CRE.

We’ve all seen the boarded-up shopping malls with empty parking lots and decaying signs. And so have commercial real estate lenders. Sears, J.C. Penney, Macy’s, CVS and RadioShack have all reported bankruptcies and store closures, leaving lenders looking for a different venue, or at least a different take on an old classic. Shopping malls have become mixed-use developments that include housing, boutiques, outside concert venues and chef-driven restaurants. And maybe a golf course or two.

The truth is that several of the major delinquent loans are backed by shopping centers. According to REBusinessonline, “Major loans that have fallen past maturity in the past year include several that are backed by shopping centers formerly owned by the Westfield Corporation that were later sold to other REITs.”

This includes the $240 million Westfield Centro Portfolio, the $140 million Westfield Chesterfield and the $110 million Westfield Shoppingtown Independence. Rouse Properties purchased Independence Mall after a few years of foreclosure proceedings. Their goal is to create an “open-air retail destination” with a focus on upscale dining and a grocery market as an anchor. This shopping center giant has been in a restructuring mode since 2014 and just recently announced its sale to a French company. Unibail-Rodamco will reportedly pay $15.7 billion to take over Westfield Corp. It will operate as a REIT in France, the Netherlands, the United Kingdom, and the U.S. Its uncertain if Westfield’s previous plans to seek approval to flatten the Promenade Mall in Woodland Hills, CA and build residences, offices, boutiques, restaurants, hotels and a concert venue is still on target, though chances are the French global property leader will have a similar remodeling plan in mind.

From Retail to Warehouses

Some have blamed the demise in retail and shopping centers on the online giants such as Amazon. But this expanding trail that leads from brick and mortar to mouse and keyboard has left an interesting opportunity for commercial real estate lenders and investors—industrial warehouse and distribution centers. According to American Banker, e-commerce sales are expected to reach $700 billion by 2022. And all those online purchases need a home. While most distribution centers are built on demand, there is a growing number of commercial lenders shelling out the bucks for speculative centers—centers that are selling just as fast as they can be built. In fact, with increasing demand, building in this sector is booming, vacancies are at an almost record low, and rents are rising. Mini-distribution hubs are on the rise as well. Atlanta, Dallas-Fort Worth and Chicago all made the top five in the amount of construction space geared for new warehouse and distribution centers.

Those in the business are looking for commercial real estate lenders who understand the business.

Level 4 Funding has been in the industrial/warehouse segment for over 20 years. We work with over 200 private investors and understand the sectors that they specialize in. With this type of rolodex, we can get you the loan you need at the best possible rate. Closing can occur in as little as a few days, giving you the money you need to purchase that next warehouse, build a distribution center, or develop a mixed-use supercenter in record time. Call us for a no-obligation quote.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Wednesday, March 28, 2018

Why small town businesses are finding it hard to get commercial loans

Lenders are withdrawing from less populated areas, and small businesses in rural areas are facing difficulty finding sources of commercial loans.

Local banks have been consistently closing in rural areas. The in-person service, which was once so crucial for small business financing, is quickly becoming a thing of the past. Banks are relocating to more populated areas, and larger banks continue to consolidate smaller community banks. These larger banks use algorithms, rather than personal relationships to evaluate a borrowers creditworthiness.

This trend is making it harder for many rural borrowers to qualify for business loans.The value of small business lending in rural areas is now half of its 2004 peak. Much of this decline is a result of the recession, but the amount of small business lending in urban areas only declined by a quarter over this same period. The numbers demonstrate that business owners in more populated areas are not facing the same difficulties as their rural counterparts.

The decline is having a drastic impact on business activity in less populated areas. Research by Colorado State University economist Stephan Weiler demonstrates a link between the reduction in small business loans and new business formation in rural areas two to three years later. His research did not reveal a similar pattern in urban areas.

Community banks have been leaving rural areas for decades, making commercial loans harder to find

There has been a measurable decline over the past 20 years in the number of smaller community banks in rural areas. These community banks were once the sole source of credit for many small businesses in these areas. 625 of Americas 1,980 rural counties have no locally owned community bank. 35 rural counties in America have no bank at all, and 115 have only one branch.

Lenders cite specific difficulties in rural areas."It's very hard to find highly competent commercial loan officers who want to live in these small towns and can produce an adequate amount of production," said Jerry Rexroad CEO of Carolina Financial Corp.

Rural businesses also lack the detailed information which is used by many larger banks to assess the creditworthiness of borrowers. However, economic difficulties in rural areas make it harder for banks to do business.

Economic difficulties are making commercial loans harder to find in many areas

Rural areas face unique economic challenges. Employment growth suffers due to weak school systems. Local businesses suffer due to competition with big-box stores and few small business owners have seen their credit situation improve since the recession. Business lending in rural areas has not picked up since the recovery began. Although new small dollar loans have been on the rise, rural areas have only seen a modest increase.. Only 10 percent of new small business loans, roughly 22 billion, have been issued in rural areas since the recovery began.

It remains unclear whether the banks themselves or the economy in these areas are to blame these hardships. Nonetheless small town businesses will face difficulty securing financing for the foreseeable future.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

How to Make Money Using Hard Money Loans

Hard money loans are not suitable for every borrowers needs but they are perfect to meet some specific needs. Using this loan correctly can be a great way to grow your wealth.

Nothing in this world is perfect and likewise, there is no single type of loan that is perfect for every scenario. But there are several situations which are tailor made for hard money loans. Understanding the correct time to select a non-traditional loan is the first step to using this financial tool to generate financial security for yourself and your family.

In general, hard money loans have a higher interest rate and therefore the money is costing the borrower more than a traditional loan. But for every negative there is also a positive. And in the case of these private loans, the positive comes in several forms. The first of which is that the loan approval is based on the value of the collateral unlike a traditional loan which requires good credit scores and a strong credit history to secure a loan. Not only does this fact reduce the amount of documentation that a borrower needs to provide but it also streamlines the lenders approval time. All the lender needs to do is establish the current market value of the collateral to determine if the loan will be funded or rejected. This time savings can be critical when you are trying to purchase a property before another buyer makes a better offer.

Private lending options offer borrowers a faster turnaround time, less paperwork and do not rely on personal credit or financial stability. All of these facets of private lending make this a very viable solution when considering deals such as fix and flips, land loans or construction loans. In all three of these cases it can be very difficult to secure traditional finding. And without funding, it is impossible to make these deals and reap the rewards once the project is completed. But using a private lender will allow you to complete the funding and the deal to realize the profit in the end.

How and Why It Works

As you might have noticed, all of these potential money makers are short term investments which are time sensitive. It can be very difficult to secure a loan fast enough to purchase a great fixer upper to flip or to purchase unimproved land for a new construction project. Banks are not willing to lend money for these more risky ventures nor are they willing to expedite your request. But a private lender is willing to work with you to provide more flexible terms and a faster approval and funding to allow you to meet the shorter time line. Then, with the property secured, you can invest some time in finding less costly financing and refinance or you can make the necessary improvements and flip the property quickly for a large profit.

Making Private Loans Work for You

Hard money loans are not the solution for every deal or opportunity. But they do offer certain features which can make them the perfect financial tool to use to make money and increase your financial security. When used properly by a borrower who understands the process, the risks and the rewards, this type of loan offers a great return on investment.

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OCC Study reveals risks from Commercial loans

The OCC warns in its semi-annual risk report that relaxed underwriting standards may be putting some commercial loans at risk of default. Should you be worried?

The report warns that specific influences on the credit market may be causing some banks to lower borrower standards. "The credit market continues to be influenced by strong competition, particularly from non - bank lenders, and heightened asset valuations," the report claims. In effect, strong competition for new loans may be pressuring some banks to lower standards on borrowers.

The report also warns that the recent economic boom may be making some lenders complacent and that lenders may need to take greater caution in case of an economic downturn. "In addition, the long economic recovery and expansion may collectively increase lender complacency. In this environment, lenders need to focus on maintaining sound credit standards within risk tolerances and understanding the potential credit risks that may be exposed under less benign economic conditions."

The report claims banks need to be cautious and may need to diversify their lending activities. The authors of the report, the National Risk Coalition, cite commercial mortgage growth as a specific area of concern. The NRC claims,"increasing concentrations of commercial real estate (CCRE)loans highlight the need for sound risk management processes and the effectiveness in managing concentration risk for some banks."

In spite of the dangers key commercial loan metrics remain are strong

The report claims that key metrics of commercial credit quality such as delinquencies, nonperforming loans, and net charge-offs remain positive. These key measures improved over the second half of last year and remain elevated above historical averages. Commercial credit quality is stronger than any time since the 1980s according to the statistics. New business loans have moderated from the 25% growth levels seen in recent years but remain above GDP according to the report. Non-depository groups such as investment firms and finance companies receive the majority of these new loans.

Smaller banks may be relaxing underwriting standards to fuel commercial loan growth, which could be a dangerous trend should an economic slowdown occur

Assessments by OCC evaluators reveal a gradual easing of borrower standards at many banks. Since the first quarter of 2016, the majority of banks have relaxed lending standards, rather than tightening them. The trend reflects a gradual easing of underwriting standards which began in 2013, as the economy started to recover from the recession. Even though banks are relaxing their standards, the report concludes that the majority of banks are still lending within their risk tolerances and are maintaining relatively safe underwriting practices.

However, there remains a concern that the growth in commercial mortgages may be putting some lenders at risk. Specifically smaller banks with less than a 1 billion dollars or less in assets. While business lending declined overall last year, the majority of new business loans originated from these smaller banks. Data indicates that these groups are supplementing a declining volume of residential mortgages with commercial mortgages. This narrow and specific focus on commercial mortgages may put these smaller financial institutions at risk if economic conditions change and more borrowers default.

However, the report also claims underwriting standards remain reasonable, credit quality is high, and that the economy is strong. Whether banks will heed the conclusions of the report remains to be seen.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

How You Can Solve Your Commercial Loan Woes with the Help of Hard Money Lenders

If you can get a loan, you can catapult your business into the next echelon, so why not shoot for the stars? When you are having trouble getting your commercial loan approved, it might be time to seek the assistance of hard money lenders to get you the cash you need.

Whether you are a first time investor looking at purchasing a property or a new business owner that needs cash fast to get your business off the ground, commercial loans can be a godsend. However, sometimes as a first time borrower, traditional lenders might be a little skeptical of loaning funds. That’s when hard money lenders come in handy. Just when you think you might not be able to get a loan at all, you’ll see that they can help you make your business and investment dreams come true.

Just as with any loan situation, there will be challenges that arise along the road. You will need to be prepared to handle any situation by working closely with your hard money lenders to find a win-win solution. Sometimes it's a matter of finding the right lender for the type of investment or business you have. Sometimes it’s a document or statement you’ll need to provide. Be flexible and patient, while the process can at times be frustrating, it’s important to have a lender you can trust to guide you through it all.

For investors and new business owners looking to purchase property, there are many types that these lenders specialize in like foreclosure properties, “fix and flips”, short sales, construction loans and land loans. These loans are also beneficial for business relocation that needs to happen fast as well as for borrowers that do not have the best credit score or history.

These lenders are very different than conventional bank lenders.

It’s important to know that dealing with conventional lenders are a totally different story – their application process is very detailed and often quite lengthy. There is a lot of bureaucracy and “red tape” that can be avoided with hard money lenders. If you’ve applied for this type of loan in the past, you know the road can be long and arduous. Luckily, that’s not the case with non-traditional lenders and alternative lenders offer many benefits – including an easier application process and quicker turn around time.

It starts with the right lender.

The lender is just as important as the loan itself. It becomes something of a partnership, so finding a lender you can rely on is very important. You will want to ensure they can guide you through the process but also won’t take advantage of you either. Ask around to see if business associates or friends can refer a great lender they’ve worked with in the past. Look for a local lender and don’t be shy about meeting with them and asking questions prior to agreeing to move forward. Once you find the right lender, the road to getting your loan will be much smoother!

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Tuesday, March 27, 2018

Triple Your Chances for Getting Hard Money Loans

Using a few tips can greatly improve your chances for securing hard money loans. You might also find that these same tips will increase your profit as well.

Applying for any type of loan can be stressful, and one of the best ways to avoid that unnecessary stress is to be well prepared. Knowing what to expect and how to best present your request can not only reduce your stress level but can increase your chances of getting hard money loans.

The first item that you need to understand is that a lender is only going to consider the loan request if the amount is within the industry standard 65-75% loan to value range. This means that the loan cannot exceed 75% of the value of the property. With that in mind, you need to be prepared to pay any additional cost above that 75% in cash. Understanding the LTV concept allows you to ask for a reasonable loan amount and also prepares you for the down payment which will be required. You will appear very well prepared and professional when the lender mentions the down payment amount and you tell the lender that you already have those funds available.

Another important question that you need to be ready to answer is about your exit strategy. Every lender wants to know what your plan is for the property and how you plan to achieve your goal. This could be completing a renovation and then renting the property or it could mean selling it after a renovation. But this is basically you explanation about how you plan to be able to repay the loan.

Compare Your Offers

The final strategy is to seek several hard money loans in an effort to have multiple offers to choose from. This is the same method that you would use to select any service provider and it allows you to shop for the best terms and overall cost of the loan. Be sure to calculate any loan origination fee, funding fee or early payment penalty that might be included in the terms of each offer to determine the true cost of each option.

Improve Your Chance for Success

There is a lot of information that you need to understand before securing hard money loans. But if you are willing to invest the time, then you can secure multiple offers. This allows you to select the best loan offer to meet your needs. In addition, preparing to answer the questions of the lender about your exit strategy and down payment funds is a good opportunity to fine tune your business plan for the project. Planning for the down payment and your exit are both smart business decisions that will help you to land a loan as well as increasing your potential profit at the end of the deal. It can be tempting to rush into a purchase when you find a great property with a lot of potential. But investing a little time in the planning phase will provide a great foundation for the project and better potential for your return on investment.

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Using a few tips can greatly improve your chances for securing hard money loans. You might also find that these same tips will increase your profit as well.

Compare Your Offers

Improve Your Chance for Success