A non-conforming project can take advantage of a commercial hard money lender who will provide the much needed funds. Although these lenders are more expensive, they prove more dependable and lucrative in the long run. Gone are the days when people looking for means of financing their ventures trudged from one bank to the other, each of which had lengthy procedures to follow. Time itself means money and the cumbersome waiting only added to the woes of the prospective borrower. To circumvent almost all the bother, in stepped private money lenders. A commercial hard money lender provides finances for commercial or business oriented investments only. Such lenders can be:
• A single entity
• A mortgage Company
• Federal Banks or
• SBA lenders
The money lenders give the loan against a commercial or residential property or a combination of both. They are a boon as well as a bane as far as the borrower is concerned. Commercial lenders of hard money are a blessing under certain circumstances, like:
. At such times when money is needed for a short duration.
• When large sums of money are needed to close a deal quickly.
• At times when the borrower already is under debt for some other undertaking
• The borrower has a poor credit history
• The property which he wants to obtain does not meet the standards of traditional lending institution.
• When the borrower does not want to go through the rigors of formal lending organizations that entail excessive documentation and endless hours of waiting.
A commercial hard money lender is a perfect fall-back when a borrower has been turned down and faces hopelessness. He need not be provided any proof of income or ability of the pay back from the borrower. All that is needed is collateral and he is lenient in case of default. The delinquents do not lose all future opportunities to apply for loans if the need ever arises. As compared to individual lenders, mortgage companies may offer a lower loan rate but a higher pre-payment fee.
Commercial hard money lender is a company or a private person loaning financial support. Often commercial hard money loans are being issued with a higher interest rate than the traditional hard money loans. Commercial hard money loans are usually being given for a short period of time and sometimes they are called bridge loans or bridge financing.
As traditional commercial hard money loan programs are very risky and have a higher than average loans likelihood of default, commercial hard money lenders offer a wide range of requirements on the type of real estate, special loan-to-value percentage and the certain minimum loan size for a commercial hard money loan.
Bridge lender programs and commercial hard money loans:
Bridge lender programs and commercial hard money loans are similar to the traditional hard money in the part of terms of the interest rates and loan to value requirements. A commercial hard money lender or a bridge lender could usually be described as a strong financial institution with a large deposit reserves. Making a discretionary decision on a not conformed loan is totally in his power. Usually commercial hard money lenders (or borrowers) not conforming to the standard guidelines of a residential conforming credits.
And because of the fact it is a commercial property, commercial hard money loans usually also do not conform to the guideline of the standard commercial loans. It is the usual and absolutely normal situation if the borrower is in a temporary financial distress or has just a building permit in place. The commercial property may not be in a good and marketable condition for a number of reasons; it may not be completed after the process of construction or reconstruction etc.
Some commercial hard money lenders (bridge capital groups or private investment groups)could require some sale-lease back requirements or the joint venture to create an additional background for such a risky transaction that has a really high default rate. It is really usual situation when commercial hard money lenders temporarily offer hard or bridge money, allow the owner of the property to buy back his property within only a certain (as usual, not long) time period. If the property was not bought back by purchase or if it was sold within the period of time the commercial hard money lender would get a right to keep the property at the agreed to price. In the case of default the property owner may lose the property to foreclosure.
The commercial hard money lender charges a higher rate of interest than conventional lending institutions. It is a matter of personal choice, existing circumstances and past experience in opting for a private lender to bridge the gap between your dream and its realization.