Often borrowers find themselves in very difficult positions as many traditional and nontraditional banks will not even look at their loan request if their score is below a 650. The biggest and most important for you to know is that NOT all SBA lenders are the same. Cut the ground out from under him. Commercial hard money is probable the first thought for many when considering a commercial loan with a borrower that has bad credit.Most hard money commercial lenders are interested in the properties equity and or its cash flow and the borrower’s credit score is often just an afterthought.No waiting for capital/draws while city and bank approve work. The expense is the downside.
Their situation was that their loan had ballooned and despite their best efforts they could not get their existing bank to refinance the loan or find another bank that would either.After a year of searching they could not get it done and their existing bank put more pressure on them by calling the “note” forced foreclosure.Commercial Second Mortgage comes in a Fixed Rate Second or Equity Line of Credit. Although both loans fit within the commercial “sub-prime” category, both fall into different niches.Neither option is ideal for the borrower, but either loan can be a viable option for borrowers that have been declined by traditional banks. Prepayment penalties are stiff ranging from 5% for 5 years to 10% for 10 years.In addition, some stated income lenders require lock out periods for as long as 5 years.The commercial second mortgage can be a solid alternative; however borrowers should be aware that the loan program does have limitations.
5% -13% with 1 – 2 points for the typical commercial stated income loan. Rates are high at between 12%-16%, interest only, with 3-6 points on the front of the loan. Bring on the sun. For example, if the borrower is attempting a cash out refinance at 75% loan to value, there are simply no hard money lenders that will fund that deal. On the other hand the points and rate are lower with stated income but the prepayment penalties can be very expensive.
Traditional commercial rehab bank loans also have their share of pros and cons. Currently, borrowers that want to go the traditional bank route for their rehab financing should think SBA assuming the borrower will occupy their business out of the subject property.We are also seeing an interesting dynamic right now as many people re contemplate the benefits and potential appreciation of real estate ownership. How do I deposit the Hard Money Mortgage funds into my checking account? Therefore, commercial loans are not personal loans and it is the business or the business project that needs to qualify and prove reliability and feasibility in order to be eligible for commercial financing.It was a “given” just 6 months ago that real estate was a sure thing. Following are some facts about commercial loans that need to be taken into account and that though they should be common knowledge, people usually ignore them.
Therefore, you should act wisely and find out what you will be asked for prior to actually applying. Can I Get Cheaper Rates If My Business is small? There are really no differences or promotions for small businesses as opposed to big ones. The overall amount is the same, but the risk is significantly smaller.Commercial Apartment Loan. There Are Not Many Commercial Loans Out There.
For example, if the borrower is attempting a cash out refinance at 75% loan to value, there are simply no hard money lenders that will fund that deal. If the borrower situation allows them to pick which route to go, the choice normally boils down to the expense of either loan.There are a couple of different reasons for this. Options For Commercial Rehabilitation Loans.One is the historic stability of the asset class, and secondly, the government plays a big role in supporting the banks and lenders that fund commercial apartment loans. Currently, April 2008, the appetite for private construction loans is waning as hard money lenders .The stability of the apartment buildings is both simple and complex.
Hard money lenders are cherry picking and often will choose loans that do not have the complexity and inherent risk that goes along with rehab financing – like good old refinances. However, commercial construction borrowers “pay” for these loans with their time and intense documentation/reporting requirements – brain damage. A bottomless pit.Some Important Facts About Commercial Loans Commercial loans are a loan type that includes those loans needed to fund a business and also loans to purchase or finance the construction of a property for a commercial business. In order to clarify these issues, we are going to contrast common and erroneous beliefs with the actual facts about commercial loans: Commercial Loan Approval Can Take Six Months or More? This is not necessary true.
Neither option is ideal for the borrower. From a traditional banks perspective Commercial Rehab Loans are essentially the exact same as construction loans.
December 29 2010 04:12 am | Uncategorized