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Commercial Hard Money Lenders Raise Costs
Commercial hard money lenders have both increased the costs of their loans and have become much more selective on the hard money loans they will consider. The reason is very simple. The demand has sky rocketed as bank financing has slowed to a crawl. We are seeing many "bankable" loan requests now being forced to go the hard money route.
Many borrowers are unaware just how conservative banks have become. And some banks, in worse positions just do not have any money to lend. They have their own issues to deal with. In addition, the demand for capital increases during difficult times, as business owners scramble to raise capital/consolidate debt to better prepare themselves.
In short, commercial hard money lenders are inundated with loan requests and are cherry picking. All underwriting standards have increased. For example many hard money lenders now have minimum borrower credit scores and require enough cash reserves to service the debt for 3-9 months without aid from existing net operating income...
Commercial Hard Money Lender
Borrowers can expect to pay an additional 2 - 4% on the interest rate and an additional 2-6% on the points to do a commercial hard money loan. January 2007, it was common to find commercial hard money lenders that would do a "10 an 2" for strong loan requests. Meaning 10% as the interest only rate and 2 point to the lender. Now borrowers should expect 12% as the floor and 3-4 points as the beginning point.
Like it or not, this maybe the best option for you given the state of the market. You should consider the loan not as compared to bank financing but compared to your other real options, like finding a partner, or losing the property outright to foreclosure. These options are always more expensive than hard money...
We have the experience and expertise to get your commercial hard money request closed. Fill out our pre approval form so we can give you meaningful answers.
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