HOW TO CHOOSE A PRIVATE MONEY COMMERCIAL LOAN

Using a private money lender for real estate is a great way to secure a deal you can’t get over the line with a bank or traditional financial institution for whatever reason. Private commercial money loans are usually quick to lock in and come with a range of benefits but, like any major decision, choosing both the right loan and private lender for real estate can be a challenge. Here are the questions you need to ask to make sure you’re choosing not only the best commercial lender but the best private commercial real estate loan for you.

THINGS TO CONSIDER ABOUT THE LOAN

1. Flexibility. Do the loan terms offer everything you need and are you comfortable with all the attached conditions? Be aware that many private money loans can be customized based on your requirements and it’s worth asking if things can be changed to suit you.
2. Rates. What are the interest rates on offer and how do these compare to other private real estate lenders? It pays to shop around and find a lender that offers you competitive rates. Keep in mind that private money loans typically incur higher rates than conventional loans and if it sounds too good to be true, it probably is.
3. Terms. Are the terms favorable? How do they compare to other private commercial money loans?
4. Criteria. There’s no point pursuing a private commercial loan if you or the property you want to finance doesn’t fit within the lender’s criteria. Check these out before taking the next step.
5. Additional fees. Does the loan incur other costs you haven’t considered? Many private money loans come with additional fees such as documentation costs, underwriting fees and legal fees. Find out whether the lender charges these from clients and choose one who doesn’t. Additionally, be sure to ask what the pre-payment penalty rates are to avoid being stung down the line by excessive penalties.

THINGS TO CONSIDER ABOUT THE LENDER for a PRIVATE MONEY COMMERCIAL LOAN

1. Credibility. Does the private commercial lender have a good reputation? Are they known to be trustworthy? It pays to do your research to make sure you’re choosing someone reputable. Seek out reviews and, if you can, speak to a previous client to find out how their experience with the lender was and whether or not they’d recommend using them.
2. Responsiveness. How fast is the direct commercial lender when it comes to getting back to you? Are their answers useful and do they make sense? Is the lender speaking a language you understand? If you’re not getting prompt or helpful replies, consider this a red flag.
3. Experience. Does the lender have plenty of experience in the business of private money loans? And better yet – do they have their own building and development experience? This is a huge bonus. A lender with commercial building and development experience of their own may have invaluable insight and advice to offer as well as their own network of contacts who can help with various aspects of your project.

WHERE TO LOOK

When it comes to choosing a private money commercial loan, a personal recommendation or referral is always a great place to start. If you don’t have an existing network, however, check out The American Association of Private Lenders. In business since 2009, the American Association of Private Lenders is a national organization that represents the private real estate and peer-to-peer lending industry. They have a huge network of private money lenders, hard money lenders and more all around the United States and each year hold a massive American Association of Private Lenders conference. Their members all voluntarily agree to follow a firm Code of Ethics based on principles of duty, fairness and responsibility. This means when you choose a private lender from their network, it’s likely you are choosing a reputable private commercial real estate lender with your best interests at heart.

Another option is to skip all the searching and start right here: Alpha Funding. We’re one of America’s largest commercial real estate lenders known for our great terms, rates and flexibility as well as our honesty and integrity. To find out more about our services and how we can help you fund your commercial real estate purchase or renovation, click here.