Off Market Commercial Real Estate Blog Uncategorized

Commercial Loans

Hard Money Loans vs SBA Loans

Financing for commercial real estate is a completely different game when compared to residential mortgage loans. Commercial loans are generally speaking harder to get than residential ones. Today I will touch upon hard money loans briefly.

Commercial Real Estate loans – Hard Money Loans

When purchasing commercial real estate, financing is the most significant factor in determining whether the project is worth pursuing. Although there are a variety of commercial real estate loans on the market, we are going to look at hard money loans in this article. Also, if you want to get a general idea about commercial loans, read this Wikipedia article…

Hard money loans for commercial real estate are often a matter of last resort. They aren’t good deals, but they can save a financing situation that has gone critical. Most hard money loans come with significant upfront costs and astronomical interest rates. When you are facing the prospect of losing a commercial property, however, they can be a godsend because they also are granted very quickly if your project is a viable one.

Commercial loans & Mortgages

Hard money loans are considered very risky and are issued by private financing groups, not banks or lenders. The loans tend to be only available as the primary loan on the property, which isn’t that rare of a situation in commercial property.

Unlike home loans or conventional commercial loans, including SBA loans, hard money loans are all about the potential sale price of a piece of commercial real estate. The party considering lending you money is not going to look at the current appraised value of the property solely. They are going to look at the probable future value and sale price of it if the commercial real estate has to be sold a few months or a year after making the loan. Or, possibly until you refinance the property and take it out. Depending on the condition of the property, this figure will typically be between 50 and 75 percent of the appraised value of the commercial property.

Put another way, a hard money loan is a short-term loan designed to get you past an immediate problem. It is undeniably a loan of last resort and is not an ultimate solution to a financing problem with a commercial property. It does nothing other than buy you time and at a fairly hefty cost. If you are in a tight spot and can resolve the problem with a few extra months time to a year, a hard money loan may be the answer.

That being said, if you need a more secure and reliable loan that will not break the bank then consider getting an SBA loan. Contact Us to see if we can help you get an SBA loan with no up-front fees.

SBA loans can help you accomplish your long term goals without putting excessive stress on your shoulders. Due to the fact that of low-interest rates of an SBA loan will help you create more equity in your business and at a much faster pace. In other words, while SBA’s objective is to make you and your business a successful endeavor and create more jobs in order to improve the US economy as a whole, a hard money loan provider’s goal is to make as much money as possible in the quickest period of time. And hence, a hard money loan provider does not care whether you prosper or not in your business endeavor as long as they get paid their money.

The option is quite clear at this point about which loan will benefit you more I think. Now, the choice is yours …

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