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Published Jan 25, 23
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Hard-money lenders typically base loans exclusively on with little reference to borrower creditworthiness. Eligible properties can include commercial buildings, storefronts or facilities like a warehouse or lab. Single family residences won’t qualify, though a multi-family property might if you run your business out of it and the business occupies at least 51% of the property.

For example, if the property is appraised at $200,000 and the lender requires a 70% LTV, you’ll be expected to put down $60,000 to receive a loan of $140,000. Applying for a commercial mortgage can be slow and often requires a lot of documentation. At the other extreme, you might be able to secure a hard-money loan in days without producing copious financial information.

Business owners with poor credit or new businesses may face more obstacles when applying for a commercial real estate loan. Some things you can do to help boost your chances of getting improved include: Paying off existing debt and taking other steps to improve your credit scores Pledging additional collateral if you have it Adding an investor or cosigner Agreeing to pay a larger down payment and/or higher interest rate Selecting a less expensive property If you're wondering where to get a commercial building loan, there are multiple sources you can obtain one from.

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The following is a summary of the pros and cons of working with certain types of lenders: Most banks provide commercial financing for various types of properties. The typical loan size for a traditional bank loan is about $1 million. Good rates Convenience, possible discounts as an existing bank customer Long-term financing options Requires extensive documentation Slow process Only for borrowers with good or excellent credit In addition to banks, there are many non-bank finance companies that can provide commercial real estate loans for small- and medium-sized companies.

Less rigid underwriting standards Faster approval than banks Lower fees and closing costs Interest rates are often higher than with banks May require a balloon payment in 5 to 10 years Many are short-term loans and can be used for real estate or long-term equipment purchases. They are composed of two loans: one from a bank that’s typically 50% of the loan, and the other from a Certified Development Company for up to 40% of the loan.

Below-market interest rates Terms of 20 or 25 years Low down payment Using the , you can borrow up to $5 million through an affiliated lender, depending on eligibility. These loans can be used to construct new property, renovate property and purchase land or buildings. Rates are based on the prime rate plus a margin of a few percentage points.

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Hard money loans are short-term loans based on the value of the property. These loans are usually made by private companies and tend to have higher down payment requirements. Qualifying for the loan is easier and getting the loan tends to be faster than a traditional mortgage. Doesn’t evaluate borrower’s credit rating Fast approval Easier to qualify for Higher interest rates Average LTV ratio is 60% to 80% Short-term financing Conduit loans are commercial mortgages that are pooled together with other types of commercial loans and then sold to investors on a secondary market.

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Amortization is typically spread out for a longer period, which keeps payments relatively low, but you’ll pay the balance in one final, large balloon payment. Low interest rates Amortization period longer than loan term Non-recourse loan doesn’t require personal guarantee Crowdlending platforms match borrowers to individual lenders. There are multiple marketplaces focused on commercial lending.

Fast turnaround Loan access for most credit scores Easy application process May have high interest rates High origination fees Fewer regulations than traditional lenders .

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The Small Business Administration (SBA) offers financial assistance in the form of partial loan guaranties on small business loans made by banks and other commercial lenders. When a loan request does not meet regular lender approval requirements, SBA guaranteed financing can enable the lender to provide financing the would not otherwise be available on reasonable terms.

The maximum loan amount is $2 million. The SBA guaranteed portion is limited to $1 million, or 75% or the loan, whichever is less. Loans up to $150,000 may be processed under an expedited procedure known as “Low, Doc.” Under the primary 7(a) loan program, the SBA can guarantee 85% of a loan up to $150,000 and 75% on loans over $150,000.