Privately funded, often called “hard money” commercial mortgage loans typically carry annual interest rates of more than 10% and charge origination points of 2%-4%. These kinds of rates and terms may seem restrictive, but when the situation calls for it, taking advantage of private lending is a smart business move.

When Time is of the Essence

In the commercial real estate game time truly is money. Experienced property owners, investors and developers will tell you that often speed of execution can trump interest rates and points. When facing a looming purchase option expatriation date, a pending balloon payment that’s coming due fast, an unexpected cost overrun or, worse, a foreclosure scenario business people don’t have time to wait the 60-90 days it can take to close a conventional bank loan. Unfortunately, there are times when your property or you project are on the line and nothing short of quick cash can solve your problem. Hard money lenders can make on-the-spot decisions and can close fast. One week funding is very possible and any legitimate private lender can close almost any deal in less than 3 weeks. Hard money is relatively expensive but it’s a heck-of-a-lot less expensive than losing your deal.

When You Have Credit or Documentation Issues » Read more: When Do Hard Money Commercial Mortgage Loans Make Sense

Contrary to popular belief “hard money” loans are not called hard money loans because they are hard to get or because their expensive terms and conditions are hard on borrowers. The name comes from the fact that hard money loans are loans that are, by definition, backed by a hard asset such as a piece of real estate or another asset like a bulldozer or a piece of manufacturing equipment.

In the recent past hard money loans had a bad reputation but today the term hard money simply refers to private, non-institutional, asset based lending. In fact with, the onset of the worldwide credit crunch, private lending has become main-stream business and is, in-fact, the fastest growing segment of commercial real estate finance.

Private lenders usually offer short term (12-36 month), high interest (9-15%), bridge loans against commercial real estate. Private lenders might be wealthy individuals, small firms organized to make loans or real estate divisions of hedge funds or private equity firms. » Read more: Commercial Mortgage Loans – Hard Money is Not Hard to Get If You Meet These Requirements

When you need money to purchase a business property, whether to open a new business or expand your current one, commercial mortgage loans can help you get the cash needed to move forward. You can apply for a commercial mortgage loan through a traditional lender such as a bank or through a private lender. To get approved for this type of loan, you should already have a property in mind that you’d like to buy, a good credit history, and either a well put together business plan or proof of a stable financial history for your business.

No matter which lender or type of commercial mortgage loan you choose, there are many benefits supplied by this type of loan. Let’s look at some of these benefits and see if they apply to your situation.

Buy or Expand while Maintaining Cash Flow

Even if you already have plenty of cash on hand, you might not want to spend it all on a new commercial property purchase. Obtaining a commercial real estate loan will allow you to keep a steady cash flow while paying back your loan over time. A steady cash flow will give you freedom to purchase supplies and inventory, pay employees or contractors, and promote your business. And best of all… the interest on your loan is tax-deductible! » Read more: Benefits of Commercial Mortgage Loans