Small Commercial Loans

August 26, 2009

Small commercial loans these days can be frustrating for many borrowers to find and obtain.  With the recent downturn in the commercial real estate market, small commercial loans are taking a hit.

Many banks and institutions have tightened up their standards.  The debt coverage ratio required has gone up, and values have dropped as vacancies have increased and rents, in general, have slid.  In addition, the cap rate used to value these properties is climbing.

All of these issues taken together makes small commercial loans more difficult than ever to obtain.  In these financial times, one option that could make sense is working with hard money to secure your small commercial loans. 

There is still capital available through hard money lenders, and although the valueation of the property is essential in the underwriting of small commercial loans, the strict debt coverage ratios that many institutions are imposing on borrowers are not.  Where a bank may require a DCR of 1.25 or better, many hard money lenders will make their small commercial loans with a DCR of 1, sometimes less if there is an exit strategy and the loan is needed only for bridge purposes.

 In addition, working with private investors can allow for greater flexibility and more creative opotions for your small commercial loans.  One example of this is the ability to cross collatarlize other property.  By bringing additional properties to the table, often times borrowers are able to overcome value issues of the subject property.

You can learn more online about commercial loans, or you can contact me directly today.  My name is Chris Goulart, and I can be reached at 877 462 3422.  I am happy to answer any questions you may have regarding small commercial loans, and can talk with you about your options, whether through hard money or institutional lending sources.

Posted in Commercial Lending