When it comes to funding for commercial real estate, the number of options for investors can be overwhelming. Should you go with a traditional loan from a bank or should you seek out other alternatives for financing your new or redevelopment?
The ability to finance your investment in a timely manner and with the unique needs for your property is essential to the success of your project and can cause discouragement if you are not aware of or the correct type of loan is not offered by your bank or lender. This is where alternative lenders come in. SFG Loan Progression Manager, Reid Wagner, of Seattle Funding Group, discussed the benefits of working with alternative lenders in a recent blog post.
Alternative lenders are a great resource because they have the “ability to be so creative when structuring the terms of a deal,” said Wagner. “Oftentimes, a bank will try to fit you into a pre-structured box with their organization with set terms and minimal flexibility.”
This limitation of traditional lenders and banks is largely due to the regulations and guidelines these types of lenders must follow. Traditional lenders are, for the most part, restricted to providing loans that are predetermined by the bank with little room for negotiation. This can be extremely limiting and can cost investors significant profits if the loan does not satisfy their needs or does not occur in a timely manner.
Alternative lenders, such as private money lenders, have a greater ability to mold to what is important to the borrower. Many alternative lenders try to offer the most creative terms as possible. Options might include higher leverage levels, reduced monthly payments, cross collateralization if the down payment is less than ideal, and many other alternatives specific to the needs of the borrower, according to Wagner.
What’s important is these types of lenders are flexible. They provide options that are adaptable to satisfy the pressing needs of a borrower. They have the ability to structure deal terms where everyone wins.