Identifying Various Commercial Hard Money Loans

Perhaps the most common type of commercial hard money loan is known as a bridge loan. Simply stated, this type of loan is for a short period of time to cover funding until permanent financing becomes available. When dealing with this type of commercial loan the credit worthiness. This falls in line with general hard money lending.

One example of the use of a bridge loan involves a boutique hotel in Coronado. After investing close to 6 million dollars in renovations, the note holder refused to extend the length of the loan and was in the process of foreclosure. Luckily, the hotel was saved through a bridge loan which kept the hotel afloat until long term financing became available. Their use of a Los Angeles hard money lender saved their operation.

Many organizations offer bridge loans with requirements similar to hard money lenders in the residential arena. The requirements are a much more lenient than tradition brokers. Often, bridge loans require little documentation, so income verification, and in certain instances appraisals, are often unnecessary.

Commercial hard money loans can be used for a multitude of purposes, with the primary function remaining the quick purchase of a desired property. Hard money lenders specialize in this type of “fast turnaround” processing.
Another type of common commercial loan, also in line with the bridge loan, is the value added loan. It is as the name implies – an individual purchases an existing property and uses the proceeds for improvement.

A good example would be purchasing an empty retail center, improving the shops, and then enticing new tenants based upon the improvements.
This type of value added financing works with raw land as well. Often an investor uses a value added loan to purchase the property. The Developer then works to have the property rezoned to his benefit. The property is then either refinanced for a longer period or sold.

The third type of common commercial loan is referred to as an opportunity fund. This loan is highly specialized and requires expertise before moving forward. Opportunity funds include working with pension plans and endowments among things. Needless to say this type of deal should result in a high yield for the purchaser in addition to the profits for the hard money lending group.

Regardless of the semantics of the type of loan, most hard money lenders are used to either rehab existing properties or finance acquisitions until further funding becomes available. This theme will occur again and again in the hard money lending niche.

As we noted in our boutique example, Los Angeles hard money lending practices are an important part of the renewal of urban areas. Whatever the commercial endeavor, there is a lender with that specialty. If there is a demand for a hard money investment in a movie theater, there will be investors to fund it.

Typically, however, the lenders look for more secure investments such as apartment buildings or retail outlets. A hard money loans investor will make such a loan on an apartment complex, but will include guidelines such as a million dollar minimum loan with a property value in excess of a 1.5 million. The loan to value ratio is generally in the 60% to 75% range.

Commercial hard money lending institutions will always look for ways to quickly turn their capital into profit. If you have a great idea that requires a fast loan process, then you’ll likely want to review these loan types for future benefit.