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Types of Commercial Hard Money Investing

Florida Private Commercial Investor | Jacksonville Hard Money Loans

There are several types of commercial hard money loans. The major differences are whether the loan is secured by physical property, a record of successful business, or an excellent credit rating. Let’s look at each type.

This type of loan is secured by a physical property, such as a commercial building, strip mall, or perhaps even an apartment or multiple family building. The advantages of a Hard Private Money is quick processing, from 10 to 21 days on average. There is a tendency for investors to overlook some credit issues, since the loan is secured against the building. The downside is that the building must normally be owned free and clear, without mortgages or liens. This type of loan might be useful to a building owner with marginal credit or poor recent tax returns, but looking for quick capital.

Alt A or Subprime Loan —

Subprime loan applicants may have low to normal credit scores, but show a good record of employment income. Borrowers show a good debt to income ratio of less than 50 percent, but have been turned down by the banks. Interest rates of subprime loans are normally lower than a hard private money loan, with closing times comparable.

Bank Statement Commercial Hard Money Loan —

A bank statement hard money loan is secured by real estate but uses a client’s personal and business banking statements as the basis for the loan value. These loans can close relatively quickly, as there is less paperwork to review than for other kinds of loans.

Foreign National Commercial Hard Loans —

Foreign nationals (non-U.S. citizens) can use these loans based on the equity of properties they own. There is no credit check used, since the loan is secured by the property. Loans can typically be closed in a couple of weeks.

Bank Conforming Commercial Loans —

Conforming loans are underwritten as first mortgages on a property. Good credit is required, and a client must show consistent income for two years or longer depending on the loaner. Closing times are longer than with other hard loan options, because the loan is based on both equity and income, and verification is more complex. The resulting loan, however, resembles a standard bank loan with similar terms and conditions.

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"I just closed a commercial loan in St. Petersburg. A 16 unit apartment complex for $100,000 at 11.5% interest. It was a free and clear equity driven low documentation refi with no appraisal so it closed fast!"

Mikle / Broker


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