123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Real-Estate-and-Foreclosure >> View Article

Commercial Hard Money Loan Scenarios

Profile Picture
By Author: Larry Tang
Total Articles: 512
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

A commercial hard money loan is a non-conventional commercial real estate loan that is not made by a traditional bank. This type of commercial financing has been in use for over 50 years. Such loans usually have a first lien on commercial property. If a hard money loan has a secondary lien, it is known as mezzanine financing.

There are three financing options for most commercial real estate scenarios: traditional banks, intermediate lenders and hard money lenders. The primary rationale for a small business considering a commercial hard money loan is that traditional or intermediate commercial financing options are not viable.

In those situations where traditional banks and intermediate lenders both say "NO", it then makes good business sense to explore under what terms a hard money commercial loan might be available. Many viable small business projects can be funded ONLY via a hard money lender. Before accepting "NO" from the traditional banks and intermediate lenders as the "FINAL ANSWER", a prudent small business borrower should determine if a hard money lender will say "YES".

Commercial hard money loans ...
... are typically completed more quickly than a traditional commercial loan. Compared to traditional bank business loans, commercial hard money loans will generally involve a higher interest rate (prevailing range of prime rate plus 4-8% for typical scenarios), higher fees and shorter-term financing (one to three years). However, because many hard money loans offer interest only terms, the payments can be lower than a fully-amortized loan with a lower interest rate.

Three common commercial financing scenarios using hard money loans are described below.

COMMERCIAL HARD MONEY LOAN SCENARIO # 1: Low Credit Scores

Most traditional commercial loans have very strict standards for acceptable credit scores by the guarantors for a commercial real estate loan. Hard money loans are much more flexible and low credit scores are acceptable.

COMMERCIAL HARD MONEY LOAN SCENARIO # 2: Need to Obtain Commercial Financing Quickly

Traditional commercial loans will normally require several months to complete. Hard money loans can be obtained within a few days in some situations. This difference will be critical if commercial financing is required within a short time frame.

COMMERCIAL HARD MONEY LOAN SCENARIO # 3: Special Small Business Situations Not Easily Understood by Traditional Banks and Intermediate Lenders

* Foreclosure
* Bankruptcy
* Special Purpose Properties
* Tax Liens
* Losses
* Negative Net Worth
* Less than one year in business
* Environmental Requirements

For each of the three scenarios described above, a commercial hard money loan will involve shorter-term financing, higher fees and higher interest rates than a commercial loan from a traditional bank or an intermediate lender. However, the critical point which must not be overlooked is that for most situations covered by the three scenarios, commercial financing would be declined by either traditional banks or intermediate lenders. It is under these circumstances that a commercial hard money loan becomes a practical and viable solution for many small business owners.

Total Views: 330Word Count: 505See All articles From Author

Add Comment

Real Estate and Foreclosure Articles

1. Land Clearing Services: Reducing Fire Risks And Promoting Safety
Author: Texas Ace Land Clearing

2. Leading Construction Company In Karimnagar - Raichandani Sindh Developer
Author: RaichandaniSindhDevelopers

3. A Step-by-step Process For Selecting The Most Suitable Property Management Company
Author: sahasra

4. Discover Tierra Iii: Your Dream Villa Plot Awaits In Oragadam
Author: Dishant

5. Purvanchal Skyline Vista Noida - Modern Retail Shops & Offices
Author: commercial noida

6. Is It Possible For Sellers To Refuse To Pay A Buyer’s Agent In Atlanta
Author: Diamond Equity Investments

7. Industrial Spaces In Chennai : San Logistik Park
Author: SAN Logistik Park

8. Building On A Budget: Tips From Uk Builders
Author: Caroline Gomez

9. Common Inquiries Landlords Have On Property Management Services
Author: sahasra

10. What Can You Expect If You Live In Ultra-modern Flats?
Author: Saurabh

11. Accurate And Professional Underground Utility Mapping Services
Author: landsurveyor

12. What Does A Mortgage Broker Do?
Author: Andrew

13. The Revolution Of 3d Architecture Design: Transforming Visions Into Reality
Author: Askari Humbly

14. Expert Solutions For Ottawa Real Estate Management And Property Care
Author: William Gagnon

15. Indraneelam Infinia Sets A New Standard Of Luxury In Thrissur With State-of-the-art Safety And Security Features
Author: raseenadm

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: