Commercial mortgages remain difficult to obtain for some borrowers in certain situations. There are many situations in which small business owners looking for commercial financing are turned down by banks and even some private lenders. As their commercial mortgage broker, you need to know when it’s time to begin looking to commercial hard money lenders for solutions.
You should start considering hard money loans for your borrower when:
- Your borrower doesn’t fit within the bank’s credit box.
Because banks face stricter mortgage guidelines and regulations, borrowers with less than perfect credit scores are generally turned away. However, private hard money lenders are able to work with these borrowers in order to help them obtain a small commercial mortgage.
- Your borrower needs a financing solution fast.
Sometimes, you’ll work with borrowers who need a small commercial mortgage quickly, and can’t wait for their local bank to finance their request. Commercial hard money lenders can usually close a loan quickly, and for some borrowers the speed will be worth any added costs.
- Your borrower is looking for a bridge to sale.
If you’re working with a borrower who is planning to sell a commercial property to pay off a short-term loan, a commercial hard money loan is probably their best bet. They won’t have to wait for the bank to approve their request and they won’t face pre-payment penalties.
- Your borrower faces seasoning issues.
Banks have seasoning requirements for refinances, so if your borrower hasn’t owned their commercial property for very long they’re going to struggle to find a traditional lender willing to finance their request. Commercial hard money lenders don’t usually have these requirements, and are better suited to help borrowers in this position.
- Your borrower is looking to purchase and flip a property.
There aren’t many banks that will provide mortgages to borrowers who purchase and rehabilitate commercial properties. Commercial hard lenders are a great resource for borrowers looking for this type of financing.
For some borrowers, bank loans are simply not an option.
When your borrower has less than perfect credit or needs financing quickly, it may be time to seek out commercial hard money lenders. A hard money mortgage can also be a solution for borrowers looking for a bridge to sale, borrowers with seasoning issues and borrowers looking for purchase rehab financing. In these situations, a commercial hard money lender is the best financing option for your borrower.