Hard Money Commercial Loans 

Hard money commercial loans offered through commercial hard money lenders, are typically used when conventional sources are not available for the borrower.  

Private money lenders are the answer for borrowers with unusual situations and or tight timing restraints.  It is an expensive option due to the risk involved and is meant only to be a short term solution; to help the borrower resolve issues.  The term bridge (as in bridge financing) is telling in that the loan, from the lenders perspective, is meant to “bridge the financial gap” while the borrower restructures debt and or sells the underlying asset.  

The three biggest components in underwriting a successful hard money commercial loan are:

1.    Loan to Value on the proposed loan is not to exceed 60%.  In other words if your property if worth $1,000,000 the maximum loan amount would be $600,000.  Some lenders are willing to go as high as 70% loan to value but the norm is max 60%.  What this really means is that the lender is mitigating their risk by the amount of equity, to help offset potential loses due to borrower default.

2.  Debt Service.  In other words, how is the borrower going to be able to make the monthly payments?   If investment property, is the net income sufficient to cover the proposed loan?  Simply from the proceeds of the loan?  From other businesses/properties, etc?  As credit criteria is tightening this is becoming more and more of an issue.  

3.    Exit Strategy.  In other words, what is the plan in paying the lender back?  Are you going to rehab the subject property than sell?  Perhaps you have another transaction that you’re waiting on and will use those profits.  Are you going to stabilize the properties cash flow than refinance with a conventional loan?  Again, how is the private money lender going to get paid back?  You have to have a solid plan. 

Among many other issues, such as divorce, partnership break ups, construction issues with building, etc. 

Hard money commercial loans are  expensive.  Interest rates are almost always interest only, and the rate itself typically ranges from 11%- 15%.  Points are also high at between 3% - 5%.  Term is normally short at 6 – 36 months.   Loan amount range $400,000 - $10,000,000 and the loans are for both commercial real estate investors and business owner/users.

Bottom Line: If you know you are facing a difficult situation, private money lender is an expensive, but viable option.  We can structure the best possible loan for your situation.  Call now to discuss or get Pre Approved now by filling out the short form attached.

248 885-8797

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