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Commercial Hard Money Loans
Commercial hard money loans are short-term real estate loans generally underwritten with significant emphasis on the collateral, borrower equity and transaction-level exit strategy rather than relying exclusively on conventional bank underwriting criteria.
At a glance
Commercial hard money loans are short-term real estate loans generally underwritten with significant emphasis on the collateral, borrower equity and transaction-level exit strategy rather than relying exclusively on conventional bank underwriting criteria.
MDN Capital Consulting helps commercial real estate investors and property owners identify private and alternative capital sources for acquisitions, refinancing, construction, cash-out transactions and other time-sensitive financing requirements.
Financing overview
Commercial Hard Money Financing at a Glance
What Is a Commercial Hard Money Loan?
A commercial hard money loan is generally provided by a private or alternative lender and secured by commercial or investment real estate. Hard money lenders can place greater emphasis on the underlying property, borrower equity and the lender's ability to be repaid through a defined exit strategy.
When Does Commercial Hard Money Make Sense?
- A closing deadline is approaching
- A bank declined the transaction
- The property is not stabilized
- The borrower has challenged credit
- A loan is approaching maturity
- The borrower needs cash-out proceeds
- The property requires renovation or repositioning
What Can Commercial Hard Money Finance?
Potential transactions include acquisitions, refinancing, cash-out refinancing, construction, renovations, redevelopment, discounted payoffs, partnership buyouts, maturing loans and other transitional real estate situations. Potential collateral can include multifamily, mixed-use, retail, industrial, office, hotels, self-storage, land, residential investment property, mobile home parks, RV parks, senior housing and special-purpose real estate.
Commercial Hard Money vs. Bank Financing
Does Credit Matter?
Yes, but its importance varies by lender. A hard money lender may evaluate the borrower's credit history while simultaneously considering collateral value, borrower equity, experience, liquidity, property condition, requested leverage and exit strategy.
Hypothetical example
Illustrative Scenario — Bank Decline With Significant Equity
Property value: $4,000,000. Existing debt: $1,200,000. Requested refinance: $2,000,000. Reason conventional lender declined: recent credit problems and inconsistent historical cash flow. A private lender might evaluate whether the property's equity, current condition, borrower business plan and proposed exit provide sufficient support for the transaction.
Illustrative only. Financing and terms depend on lender underwriting.What Documents Do I Need?
For preliminary review, MDN generally needs enough information to understand the property, transaction, requested capital, existing debt, borrower, business plan and exit strategy. A full documentation request can follow once the transaction has been preliminarily evaluated.
Borrower questions
Frequently Asked Questions
What is the minimum credit score for a commercial hard money loan?
There is no universal minimum. Requirements vary among lenders and transactions.
Can I obtain commercial hard money after a bank decline?
Potentially. A bank decline does not necessarily mean the transaction is unsuitable for every private lender.
Do hard money lenders require tax returns?
Requirements vary. Some transactions require substantial borrower financial documentation, while more asset-focused programs may approach documentation differently.
Can hard money finance vacant commercial property?
Potentially. The lender will typically evaluate the property's value, condition, business plan and exit strategy.
Can hard money finance land?
Yes, some private lenders finance land, although leverage and underwriting can differ materially from income-producing real estate.
Can I use hard money for construction?
Potentially. Construction financing generally requires additional underwriting of the project budget, plans, permits, borrower experience and completion strategy.
Can a hard money lender refinance a maturing commercial mortgage?
Potentially. Maturity situations are a common reason borrowers investigate short-term bridge and private financing.
Financing inquiry
Have a Commercial Real Estate Transaction That Doesn't Fit the Bank?
MDN Capital Consulting works with commercial real estate borrowers seeking private, bridge, asset-based and alternative financing.