Note – The first 6 episodes were produced under the name Your Business Decision. Beginning Oct. 1, 2017 the podcast was re-branded to Financially Empowered with Ralph Russell.
In Episode 002, a solo episode, I discuss possible alternate loan options for your commercial real estate loan when you bank says no.
More than 80% of my day to day work involves assisting client across the US with their commercial loan financing requests. Banks are often very selective with their loan approvals,even after their seemingly exhaustive loan doc review.
I discuss three alternate sources for your commercial real estate loan request. 1) Hybrid lenders, 2)Crowdfunding and 3) Hard money or bridge lenders.
Hybrid lenders fit a gap between bank rates and hard money or bridge rates. This type of lender requires a credit score typically of 650 or better, offers terms on average ranging from 7% to 8.5%, fixed for 3 to 5 years with a 20 to 25 yr am, and a 75% loan to value. The loan offers often range from $250,000 to $2,000,000.
Crowdfunding has grown significantly as a funding option the past few years, especially as a source of money for fix and flip real estate investors. The minimum credit score here is usually 650, and with a loan to value of up to 85% for short term residential investment 1-4 unit properties, non owner occupied, with loan rates in the 9%-10% range. The LTV for ground up construction can be as high as 90%. The minimum loan request is $100,000. Crowdfunding companies offer lending and equity partnership financing.
Bridge loans and hard money loans are very popular as a short term option. This type of loan is used either by a borrower who has challenged credit, or the loan has to close quickly.
The key with a bridge loan is the maximum loan to value is often 60% to 65%, so these types of loans are best for properties where there may be a sizable equity position. Bridge loans are often used to get the borrower from their current financial position to a better, more stable borrowing position 12 months later after they have worked with a credit repair company to improve their scores above 680 or so.
Bridge loans often range from 12-14%, interest only for 6 to 24 months, with 3 or 4 lender points due at closing. Loan sizes range from $100,000 to as high as $10,000,000 or higher depending on the asset being held as collateral. The lenders focus on the quality of the real estate with bridge loans as opposed to the credit of the applicant.
A Free worksheet detailing the 3 alternate loan options can be accessed by emailing me at firstname.lastname@example.org.
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