How to Choose the Best Commercial Hard Money Lenders

21 Nov 2022

How to Find the Best Commercial Hard Money Lenders

If you’re looking to secure a private commercial loan, choosing the best Commercial Hard Money Lenders is essential. You want to partner with a lender who can meet your unique needs, who shares your vision, and is genuinely invested in the success of your ventures. So, how do you find and choose from one of the many top commercial hard money lenders nationwide? Here are some key things to consider when looking for a hard money lender for commercial real estate.

Is a commercial bridge loan financing right for you?

The very first thing to consider is whether a hard money commercial real estate loan is actually the kind of loan you’ll need. Generally, a hard money bridge loan is the best – or sometimes only – option for investors who need financing quickly, are looking for a short-term solution only, or have a credit history that banks won’t consider. Additionally, if you’re looking to invest in an outside-the-box property or the transaction is too complicated for a bank to consider, a non-recourse bridge lender may be a viable alternative. Of course, the flip side you need to take into account is that commercial real estate bridge loans incur higher rates than traditional loans.

Is the lender flexible when it comes to rates and terms?

Many of the best commercial hard money lenders offer nationwide funding and local hard money loans with different terms and rates. Generally, rates for these loans are much higher than conventional loans, due to their riskier nature. While shopping around and comparing these rates and terms is important and can save you money, it’s also important to choose a commercial private money lender who can adapt their offering to your specific needs. A hard money bridge loan tailored to your project and overall strategy, will be the most cost-effective option, optimizing your investment. Additionally, choosing a flexible private commercial real estate loan means you’ll be partnering with someone you can work with long-term.

What are the qualification requirements?

Many investors choose commercial real estate bridge loans because they don’t qualify for traditional financing with a conventional lender like a bank. If you’ve got a less-than-perfect credit history, or even no credit history at all, you may still qualify for commercial bridge financing with a private commercial lender. A hard money loan is asset-based, which means the lender is more interested in the viability of the property you want to invest in, than your personal circumstances and history. However, you need to note that all commercial private money lenders have different requirements when it comes to eligibility. So, before you get too far ahead of yourself, check what the lender’s qualification requirements are.

How fast can the hard money bridge loan be secured?

One of the most enticing factors of a hard money commercial real estate loan is how quickly it can be finalized. If you need to make a move on a property quickly and don’t have time for the long turnaround time banks are known for, commercial bridge financing is a great alternative. Working with the right hard money lender for commercial real estate means your loan could be approved and issued in just a few weeks – if not even sooner.

What can the commercial real estate bridge loan be used for?

Whilst many commercial private money lenders offer loans that cover the purchase, refinance or rehabilitation of properties, this isn’t always the case. Be sure that the lender in question can service your exact needs. And, in the interests of building a long-term relationship (and therefore making it even easier and faster to secure financing for subsequent projects), it pays to think ahead. If you intend to make many investments in the coming years, check that the lender you are considering partnering with has the versatility to take on different project types. This includes various properties – such as retail complexes, office buildings, condos, apartment buildings, industrial properties, and warehouses – and also different locations. Not all hard money lenders for commercial real estate are licensed to work in every state, so if you intend to invest in multiple locations, this is something to investigate.

What are the fees?

Always ask a private commercial lender upfront what fees you’ll incur, and always read the fine print. You may be charged for appraisals or inspections, as well as documentation fees for any documents you need to sign for the loan. Your credit score may affect the cost of any fees. Find out before you secure any loan so that you can factor these costs into your budgeting.

What down payment is required?

Different private commercial lenders require different down payments. Some may require up to 20%, however, others offer hard money commercial real estate loans with a 0% down payment. Again, this can depend on your experience and circumstances, so check what applies to you.

Is the lender reputable?

Ask around and check reviews to see what other people who have used the services of the hard money lender for commercial real estate are saying. Generally, a reputable lender will have their own website, positive online reviews, and have other closings to show.

Other Questions to Ask

Other things to consider and ask upfront before locking in a commercial private money lender include:

• What happens if the project takes longer than intended? Sometimes things are out of our control and a rehab project, for example, may take longer than planned. Sometimes lenders may take advantage of your misfortune by increasing your interest rates and charging additional fees if you need your loan extended. Ask what your options are if unforeseen delays occur.

• Do you service the loan in-house? Often, smaller hard money lenders don’t have the capability of servicing loans in-house, which means they’ll sell the loan or work with a third party. This can be problematic for you as the borrower, so it is worth asking how the lender in question services the loan. Another question worth asking is if the lender underwrites their clients.

• How much experience do you have? The more experienced the lender is the better they’ll be able to help you. You want to choose a commercial private money lender who not only knows financing but who knows and understands the property market and can identify the viability of your investment and help you get the most out of it. Better yet, partner with a lender who has first-hand experience with real estate investing.

If you’re looking for the best hard money commercial real estate loan nationwide, get in touch with Alpha Funding. We’ve worked with investors all across the country, helping them maximize their returns through effective, tailored loans with competitive rates and terms. To find out how we can help you, get in touch today.