Commercial Hard Money
by bill
Filed under Commercial Lending Information
Commercial hard money is not, as some people may think, hard to get or overloaded with expensive terms and conditions that make them hard on the borrower they are in fact loans that are backed by a piece of actual property or in other words a hard asset.
A hard asset is the property the loan is for such as land, buildings or even construction or manufacturing equipment like a bulldozer or injection mold machine.
It used to be that commercial hard money loans had a very bad reputation.
The recent credit crunch changed all that though and now private lending is one of the fastest growing segments in real estate financing, so the term simply commercial hard money refers to any private asset based lending.
The lenders who most often make a commercial hard money loan are the private lenders like wealthy individuals, real estate divisions of hedge funds, private equity firms and small firms. The loans are often offered as short term loans of 12 to 36 months at high interest rates, generally 9 to 15%. To qualify for a private commercial hard money loan is not difficult but does require some criteria be met.
Low Loan to Value Ratio
If the building can cover its own mortgage payment most private lenders will still not lend more the 65% for a commercial hard money loan and for those properties that are under performing or vacant you will not be able to expect a Loan to Value of more then 60%.
Cash Investment
If you are looking to a private lender for a commercial hard money loan keep in mind that you will not be able to get the loan unless you have a significant cash investment in the property. There is no such thing as a 100% or 90% commercial hard money loan
Realistic Exit Plan
Most private loans are for a very short term, generally no more then 12 to 36 months. That means if you expect to get a commercial hard money loan from a private lender you will need a viable plan to pay back the money on time.
Experience
Most private lenders do not want to take a chance on someone without any experience in the commercial property arena, therefore if you want a commercial hard money loan from a private lender be prepared to show you have a provable track record of success.
The term commercial hard money does not mean a loan that is too difficult to get or to handle but a loan that uses a thing as collateral. Sometimes that means the collateral is a piece of heavy equipment or a building but it is always something that is there.
A commercial hard money loan is most often granted by private lenders. To get such a loan you will need to meet all the criteria for it.
