Your choice of commercial real estate property financing can make or break the success of your investment, whether you’re stepping onto the commercial property ladder for the first time or a seasoned landlord.
In CRE, financing choices typically fall into two categories: mainstream lenders (the well-trodden path) or alternative mortgage financing (the more bespoke route).
But what exactly does the latter entail, and how can it benefit different types of CRE borrowers? Here are all the basics.
What is an alternative mortgage lender?
An alternative lender caters to borrowers who may not meet the stringent criteria set by traditional banks. This includes many individuals, such as first-time investors, overseas buyers, pension recipients, or those with a limited or less-than-ideal credit history. These lenders are known for their flexible approach, offering solutions that mainstream lenders often cannot.
How does alternative mortgage financing work?
Alternative mortgage financing in the CRE context refers to loan options for purchasing, developing, or refinancing commercial properties that fall outside the parameters set by traditional lenders.
This type of financing is ideal for CRE investors and developers who:
- Have a less-than-perfect credit history
- Are new businesses or lack a long track record
- Have complex financial situations that traditional lenders might find difficult to categorize
- Need financing for specialized CRE properties that might have lower credit scores themselves (such as older buildings or those in emerging markets)
- Require urgent funding to close a deal or move forward with a project quickly
Unlike banks, alternative mortgage lenders prioritize the project’s future income potential and value creation over your credit history.
They can offer loan structures that better suit your project needs and timelines. These lenders also often offer specialized financing options for different CRE asset classes.
What are the types of alternative mortgage financing?
There are three common types of alternative mortgage financing in the CRE sector:
Bridge loans
Bridge loans offer swift and versatile financing, ideal for covering the gap between transactions or funding speedy renovation projects.
For example, if you’ve just won a bid on a new property at an auction but haven’t yet sold your existing asset, a bridge loan can provide the necessary funds to secure your new investment. At the same time, you finalize the sale of your current property.
At Private Capital Investors, we specialize in bridge loans. We can provide up to $50 million with terms from one to three years, competitive interest rates, and favorable loan-to-value (LTV) ratios.
Hard money loans
Hard money loans are an excellent option for fast, asset-focused financing. They are particularly suited for purchasing investment properties.
For example, are you a CRE investor looking to buy a distressed property to renovate and flip quickly? Traditional financing might not be an option due to the property’s condition or the deal’s time constraints.
A hard money loan can provide the immediate funding to purchase and start work on the property so you don’t miss out on a lucrative opportunity.
As direct lenders, Private Capital Investors streamline the application process, ensuring rapid funding to seize opportunities swiftly.
Our hard money loans range from $1 million to $50 million, with LTVs up to 85% and terms from 3 to 24 months. Our process is designed for speed — expect fund allocation within two weeks and interest rates as low as 5.99%.
Stated income commercial loans
Traditional bank loans often require extensive documentation, which is one of the most significant barriers for many CRE investors who must close deals quickly.
Stated income loans simplify the borrowing process because they do NOT require tax returns or W-2s, making it easier for investors to qualify for loans without the usual paperwork.
Our stated income loans range from $1 million to $50 million. They require a minimum credit score of 650+, no tax returns or W-2s are needed, and the qualification process is easy.
Why consider alternative mortgage financing?
Alternative mortgage financing offers several benefits, particularly for those who may not fit the traditional lending mold. Here are some reasons to consider this route:
- These loans are designed to accommodate a variety of financial situations, offering flexible terms that traditional lenders typically cannot match.
- The application and approval processes are generally much quicker, meaning borrowers can access funds when needed.
- For those with unique circumstances or non-traditional income sources, alternative financing can allow them to invest in property that might otherwise be out of reach.
How do alternative mortgage financing lenders differ from high-street banks?
Alternative lenders specialize in helping businesses that might not fit the mold of a traditional bank loan.
If you need money quickly, alternative lenders often offer faster turnaround times than banks. Unlike banks that rely heavily on automated systems, alternative lenders frequently review applications manually.
This allows them to consider your specific situation and make a quicker decision. These lenders also take the time to understand your business, even if you have a shorter track record or a complex problem.
Because alternative lenders offer more lenient borrower requirements, it’s possible to secure financing even with a poor credit score. If high street banks reject your application, alternative financing could be your solution.
If you’re looking to grow your business or property portfolio regularly, building a relationship with an alternative lender can eventually lead to more favorable rates.
How do you choose an alternative mortgage financing lender?
Alternative mortgage financing opens up a new world of possibilities for property investment. Whether you need a bridge loan to close on a property swiftly, a hard money loan for an investment opportunity, or a stated income loan to bypass traditional documentation requirements, Private Capital Investors can tailor a solution that fits your needs.
We pride ourselves on our flexibility and ability to handle even the most complex financing situations. We don’t rely on an impersonal and automated process; instead, we evaluate each application based on its individual merits.
Are you stuck with a fixer-upper and a less-than-perfect credit score? With their strict rules, getting a loan from a traditional bank for your buy-to-let project might seem impossible.
But Private Capital Investors is different. We look beyond your credit score and focus on the potential of your renovation project. Is this building in a desirable rental area?
Can you fix it up to attract good tenants? If so, we can help finance your dream and turn it into a profitable rental property, even if other lenders wouldn’t.
Don’t hesitate to contact us to discover how we can assist with your financing needs. Together, we can find the right solution to make your project successful.
