Advantages of Small Commercial Real Estate Loans

Commercial real estate is an effective investment as it combines the properties of income-generating assets and the possibility of an increase in their value. But where funding is concerned, getting financing for commercial properties can sometimes be complicated particularly for small scale deals. The conventional funding agents such as banks usually have strict qualifying measures, significant deposit ratios, and long-cycle periods. However, there are better Small Commercial Real Estate Loans that are available from specialized lenders who understand the peculiarities of the real estate business.

What Makes Commercial Lenders Unique?

While banks have standard requirements for borrowers with specific criteria for property type, loan amount, credit scores, DTI, and LTV, private lenders offer more flexibility. This enables them to expand its reach to more borrowers and clear more loans within a shorter period without bureaucracy. Some of them focus on small commercial real estate loans of less than $1 million only since they are an important market that banks do not fully serve.

 

Small Commercial Real Estate Loans

 

Advantages of Using Specialty Lenders

Turnaround Time

The loans from the specialized lenders can be processed in days or weeks if the complete application is provided, and it will take much longer in the case of conventional bank loans. It also implies that one has ready access to financing, which is important for time-sensitive deal opportunities.

Higher Loan-to-Value Ratios

While most of the traditional banks do not go beyond providing 80% LTVs, private lenders can go up to 80-90% on some of the loans. It means that less cash or equity is required initially to purchase the common stock and less money is blown each month.

No Prepayment Penalties

Do refinance in the future if you can get a better rate without touching the prepayment penalties prevalent in institutional loans.

Specialty lenders work to eliminate barriers that are present in an industry that is entrenched with challenges to commercial real estate investment. The right financing partnership can go a long way in determining the success of the portfolio expansion.