Borrowing money from an organization—be it a bank or private hard money lender—comes with its inherent benefits and drawbacks. Like home mortgages, banks and individual lenders actively participate in formulating loans for commercial real estate that are made to business entities (such as developers, corporations, partnerships, trusts, and funds). The loan-to-value ratio for a commercial loan generally ranges between 65 to 80 benchmark.

Allow us to highlight the pros and cons of banks and private lenders, so you know exactly which one to turn to next time you bump into commercial real estate financing:

Banks

Pros

Generally, banks tend to quote the lowest mortgage rates in the real estate market. They are known to make use of the traditional loan qualification guidelines, which are a tried and tested technique of helping reduce a borrower’s risk of and by default. Moreover, these loans can stretch long-term, some spread out to 20 years or more. Additionally, they may offer synergies with other accounts.

Cons

Despite this, banks tend to have some rigid credit score, income verification, and down payment requirements, a phase where several investors face rejection as banks don’t lend on nonconforming product types. Additionally, they have a rather lengthy approval process with loans taking as long as 90 days to be secured and sanctioned. And the high prepayment penalty fee only makes things worse for the borrower in case they face a foreclosure situation.

Private Lenders

Pros

With private lending, there are usually no fixed lending requirements, which means the two parties (i.e., the borrower and the lender) can mutually reach a conclusion regarding the terms and conditions of the loan agreement. This also means more workable workout agreements in case of a foreclosure situation.

Moreover, it’s possible to secure funding in a jiffy since the loan qualification process is a lot less complex or time-consuming than that of a bank. You’ll also be saving the extra buck on fees and closing costs on the loans as they are half to that charged at the bank.

Cons

Loans sanctions by private lenders are short-term; you may expect them to last between a year or two. Additionally, they may also charge a higher interest rate.

At Commercial Private Equity, we’ll cancel out all the points that work against us as private hard money lenders. Our interest rates are delivered at less than 10 percent for all commercial loan programs. We provide commercial real estate loans to businesses of all sizes in Atlanta, GA, given that the minimum loan amount is $500,000. Our firm specializes in commercial hard money, bridge money, construction loans, raw land loans, and workouts loans. Schedule a consultation today to see why we’re everything you’ve been looking for!

By definition, a workout loan is withdrawn by a borrower in financial difficulty that has been officially restructured to assure all parties involved in repayment (as interest or principal) and performance as per the restructured terms. This loan generally consists of an extension, renewal, renewal of a loan, re-aging, and deferral.

The lender must be interested in allowing for these adjustments since the alternative is complete nonpayment and filing for bankruptcy, which would cost the lender more as it entails more expensive foreclosure activities. A workout agreement is reached when both parties involved (i.e., the borrower and the lender) mutually renegotiate the loan’s original terms.

Types of Workout Loans

Unfortunately, there is no one-size-fits-all option here to tackle your debt problems. It would be best if you studied your finances and figures in order to negotiate with your lender. Here are four potential solutions:

1. Low Annual Percentage Rate

You may negotiate with your lender to reduce the overall APR on loan to make your payments more affordable. A lower interest rate per month will help you pay lesser per month.

2. Longer-Term

The duration of your loan is another driver of your monthly payment. An extension in the repayment duration will result in you paying more interest, but the payment will also be lower.

3. Forbearance

The lender may be kind enough to allow you to skip or reduce monthly payments for the time being. Of course, you will have to make up for these payments later on, with the additional interest, but considering your current cash-flow crunch, it definitely will be a breather.

4. Alternative Repayment Schedule

As the bearer may suggest alternatives to the lenders based on your knowledge of your current situation, the lender, of course, has the authority to say no.

Consequences of Asking for A Workout Loan

If you’re unable to make your payments at any point in time, your lenders should be amongst the first people to know. The sooner you reach a negotiation, the more options you’re likely to have. To stop making payments altogether is a risky strategy. Even though settling your debt through a workout agreement may affect your credit reports, you’ll find that it’s still a better option than bankruptcy.

Do the banks keep turning you down? Don’t you worry because, at Commercial Private Equity, we’re sure to say YES! We’re a team of private hard money lenders from Atlanta, GA, who are dedicated to taking our customers out of their foreclosure situation and avoid their assets from getting seized.

We entertain requests of all sizes, given that they begin at $500,000. We specialize in commercial hard money, construction loans, raw land loans, bridge loans, and workout loans. Apply today, and we’ll pre-approve your application within the next 24 hours for free!

If you’ve made the bold choice of building your office space rather than purchasing an existing commercial property, you’re highly likely to qualify for a construction loan. These tend to be short-term, high-interest loans that are used to cover the cost of construction or rehabilitation. These loans are based upon the estimated projected value of the property upon the completion of the project.

Types of Construction Loans

There are namely three different types of construction loans:

1. Construction to Permanent Loans:

This loan is suitable for borrowers with a definite construction plan and timeline in place. You may expect the financial institution—be it the bank or a private money lender—to pay the builder in regular installments based on the completion of the work. The overall cost may then be converted to mortgage upon closing, accounting for steadier payments.

2. Construction Only Loans:

Construction-only loans are to be paid in one full installment upon the completion of the building structure. It is best suited for borrowers with significant liquidity (i.e., cash flow).

3. Renovation Construction Loans

This loan type is readily used in situations where the purchaser has bought a fixer-upper. The estimated cost of renovation and the total cost of land purchase is all wrapped up in the mortgage.

Benefits of a Construction Loan

1. Added Scrutiny for Structure

The added scrutiny provides more structure to the project to ensure it stays on schedule and budget.

2. Flexible Terms

Although you need to provide the institution with plans for the project, construction loans tend to offer more flexibility when compared to traditional lending channels. You’ll find it easier to work around the guidelines of your loan and tweak them just a little bit to best meet the needs of your project.

3. Interest Only During Construction

The construction loan is rarely ever paid out in full until the new construction hits completion, which translates to the lender not asking you to start paying down payments either. Amid the ongoing construction, you’re only expected to pay the lower, interest-only payments of the loans, giving you more time to save.

Disadvantages of Construction Loans

Construction loans are hard to qualify for as they require relatively high qualifying standards in terms of credit and down payment. They also charge somewhat higher interest rates, which correspond to a percentage of the overall prime rate. Lastly, loans this short-termed are a risk, considering you need to be able to pay off the loan in full.

At Commercial Private Equity, we offer construction loans without the need for a good credit score, and our interest rates are as low as 10 percent! We’re a team of private hard money lenders who say yes to commercial loan financing. Schedule an appointment to discuss your new office plan today.

Commercial real estate lending provides loans and other financing opportunities to companies to purchase properties for business-related purposes. These loans act as a critical part of the economy as they are essential for financing small to medium-sized startups. Additionally, commercial real estate loans tend to be bigger than residential real estate loans.

Commercial real estate loans may be sought for a variety of purposes, such as a company looking for finances to acquire a rental property or a business seeking to purchase a manufacturing warehouse. There are also several different types of commercial real estate loans; they’re categorized mainly into five for real estate purchases:

1. Bridge loans

These loans are short-term commercial real estate loans issued for a time period of six months to two years. Commercial bridge loans are primarily used to serve two purposes: (1) the buyer or borrower expects to be able to sell the property within the duration of the bridge loan, or (2) the borrower attempts to notably improve their credit rating within the time frame of the loan. For this reason, bridge loans are often used by commercial building developers, who complete the construction and sell the commercial building to another party within the time frame of the loan.

2. Hard Money Loans

Commercial hard money loans are usually only offered by private lenders or investors. These loans are guaranteed against the total monetary value of the property. Hard money is more common amongst companies with less than stellar credit. These loans are also sanctioned for very short time frames, generally for a year or less.

3. SBA loans

Small-sized businesses in the United States of America can also apply for an SBA loan that guarantees a favorable interest rate to the borrower since the lender is exposed to lower risks. Funds accumulated from this loan can be used for property purchases, working capital, purchasing inventory, and other business-related purposes.

4. Ordinary Commercial Real Estate Loans

This type of loan may be referred to as a permanent loan as it closely resembles the residential mortgage financing structure. The purchased property typically serves as the loan as collateral. Companies securing this type of loan can make use of inventory, equipment, a deposit account, or a previously owned property to serve as collateral.

5. Seller Financed Loans

A business seeking to purchase a commercial property may legally obtain finances from the seller. These loans are readily made available for income-producing properties. They are more favorable for the buyer as the payment terms are flexible and the interest rates charged are relatively low to that of conventional commercial bank financing.

At Commercial Private Equity, we are a team of private hard money lenders with over 75 years of experience in the industry. We deal in commercial hard money, bridge loans, construction loans, raw land loans, workouts loans, and other specialized loans in Atlanta, GA. Schedule an appointment to discuss your commercial loan program!