What is a “Hard Money” loan?
Generally speaking, a “Hard Money” loan is short-term mortgage (or 1st Deed of Trust), collateralized by a “hard” asset, that does not
currently generate sufficient cash-flow to support the expected loan payments. Terms are typically 6-12 months, Interest-Only, at rates
starting at 12%. Hard Money loans would generally have a maximum Loan-to-Value (LTV) of 50%. Properly used, this type of financing
can be an effective tool, for owners/investors, to execute a timely acquisition or to access cash quickly, with limited documentation.
What is a Commercial “Bridge” loan?
“Bridge” financing is the term typically applied to a short-term loan (12-36 months), on commercial property that does not meet the
requirements for conventional/bank financing either due to poor performance, time constraints, or where a borrower has experienced
recent credit issues. As a general rule, this type of financing would be available for income producing properties, or soon-to-be income
producing properties. Named for its valuable purpose as a “Bridge” to conventional financing, this product can be used as a debt facility
for purchase/lease-up opportunities, liquidity access, debt consolidation, partner buyouts, as well as a myriad of other uses. Rates start
at 7%, with LTV’s up to 75%, depending on property type, location, and performance.
What’s the difference between a “Hard Money” or “Bridge” loan and Conventional Financing?
Hard Money or Bridge loans are always short-term financing, of 6 ‐ 36 months, and typically range in cost multiples of 2-3 X that of bank
rates. In either case, these loan types are often the only type of financing available when conventional lending underwriting standards
cannot be met, either due to concerns with recent asset performance or with the borrower’s past credit history. Hard Money or Bridge
Lenders will always require a viable exit strategy through either the sale of the asset or a refinance into a permanent/conventional loan.
Can I qualify for a “Hard Money”/”Bridge” loan if I have a low credit score?
The short answer is YES! The primary focus in underwriting a HM/Bridge loan is the underlying property/asset. But of course, how the
loan will be repaid, is a close second. A number of factors come into consideration in underwriting a commercial Hard Money or Bridge
loan including borrower’s experience, liquidity, equity, property type, cash-flow, and of course, location.
I’m looking to purchase a commercial property, with a conventional lender ready to provide the majority of the financing (65-75%). Can I use a “Bridge” loan as a 2nd piece of financing to meet the purchase price?
The simple answer is No. For most commercial transactions, under $10,000,000, any “Hard Money” or “Bridge” lender will only consider
a first position lien. And more importantly, all lenders, in this economic climate, will require a property owner/borrower to have at least
25% in either fresh cash equity for a purchase, or years of “sweat” equity for a refinance. The most important underwriting principle for
a Hard Money/Bridge loan is leverage.
What types of commercial property qualify for “Hard Money” or “Bridge” financing?
Really, any viable commercial real estate, though special use properties or raw land will typically be at much lower LTV’s. Location in
or near a major metropolitan area is usually a critical factor. Multi-family, office, retail, mixed-use, flagged hospitality, self-storage, light
manufacturing, and warehouse/distribution would be high on the list, while assisted living facilities, marinas, churches, movie theaters,
and golf courses would be low. Income producing commercial real estate will always be considered.
Where do you lend?
Loans are available for properties nationwide, though a minimum population requirement of 25,000, within a 5-mile radius, is standard.
How quickly can a “Hard Money” or “Bridge” Loan be funded?
Given the lower Loan-to-Value, many Hard Money loans, can be finalized without an appraisal, which can save 2-3 weeks of
underwriting. While in a best case scenario, a Hard Money loan, in a major metropolitan area, can be closed and funded in as little as 7
days, the typical time frame from application to closing would be 14-21 days. For larger Bridge Loans (greater than $1MM), at higher
LTV’s, we will generally require a full underwriting protocol including a fresh appraisal, environmental review, and property conditional
analysis, which will necessitate a closing timeframe of 30-45 days.
How do I get started?
Simpleâ€¦.just take a few minutes to complete our confidential questionnaire and a loan officer will contact you directly, within 24 hours.