Beyond Traditional Commercial Loan Sources
Posted on Tuesday, October 21, 2008 at 8:21 amThe world of commercial loans is very different from residential ones. In the current market, however, all traditional lending sources are being pretty stingy with money. The fact that you have a vision and are ready to go does not mean much to them. Your loan application just sits and sits.
While you are waiting for that loan to go through, your construction site will be sitting there untouched. If you are intending to build within a cold climate, waiting for loan money can mean trying to break ground during those winter months. Rather than sit around and wait for the bank, why not look into private loans?
The finance market is such a disaster at the moment that no banking source is reliable. When Fannie Mae is going under, you know it is bad. Most developers are now just trying to buy time till things improve. Bridge loans from private money are just the way to do it.
With quick approval times, you will have money in hand within a few days of applying and can get the project moving. At the same time, you can seek out traditional financing for the long term without worrying about approval times. Once you have that loan, you can pay off the bridge loan.
Finance is all about leverage and liquidity. In the current market, there is no liquidity. Getting money is hard. You can leverage your position with a bridge loan, however, and get your project rolling while others fail.
If you think finding money for your project this year is hard, wait till next year. Residential mortgage defaults are expected to double. Banks will be failing right and left. Private money is the way to ride out these rough seas till 2010 when things should settle down.
Buying time does not come without a cost. Bridge loans are not cheap, but they are valuable. While you will pay more than with a traditional loan, you will be saving a project that should make you a lot of money.
It is vital to step back and realize that we are not talking about commercial lenders here. We are talking about private money. Contact three private money lenders and you will get entirely different offers. The key is to contact them and pick the best deal.
