In spite of the recovery of the overall lending market in recent years, conventional lending continues to be very restricted and difficult to obtain this year. As such, commercial real estate investors should consider using hard money loans to finance important property transactions in a timely manner. Here are just three of the many reasons that hard money loans may benefit commercial real estate borrowers this year:

1.      You’re looking for valuable properties in overlooked markets. Investors who are interested in purchasing commercial real estate in second- and third-tier markets may have trouble qualifying for conventional loans from traditional lenders who are focused on lower-risk properties in first-tier markets. Hard money lenders are typically more willing to approve loans for higher-risk properties as long as the appraised value justifies the requested loan amount.

2.      You’re purchasing a property that needs rehabilitation or has insufficient cash flow. Financing for properties that are distressed or can’t demonstrate sufficient cash flow remains difficult to obtain in the already limited commercial lending pool. While most banks are looking for any reason to turn these types of loans down, hard money lenders are not only happy to provide such loans, they will often roll funds to cover the costs of improvements and/or interest payments into the initial loan amount to purchase the property. In this way, you ensure that your project can move forward without tying up your limited cash flow.

3.      You’re tired of competing for loans from conventional lenders. With the combination of CMBS loans maturing this year and their increase in volume in 2015, experts are predicting that the competition for all types of commercial loans will be fierce this year. As many of these CMBS loans are over-leveraged, more borrowers will be looking to refinance this year in addition to those wanting to purchase new properties. Hard money lenders can help both types of borrowers by providing bridge loans to finance or refinance investment properties. Bridge loans allow borrowers the necessary time (usually six months to three years) to line up long-term, lower-interest financing from a traditional lender while providing interim funds to keep them afloat.

Whatever your particular situation, a hard money loan could be the answer to your lending difficulties in 2014. If you’re unfamiliar with bridge loans and other private financing options, check out more of our blogs explaining bridge loans, or contact Montegra at 303-377-4181 to get your questions answered today.