Many experts are predicting that banks will tighten the purse strings this year especially on commercial real estate mortgages, so it’s a good time to think about another financing tool in your commercial real estate investing toolbox: private capital or hard money bridge loans. If you haven’t already developed a relationship with a local private lender, now is a good time to reach out and make those connections. Private lenders can finance projects in shorter timeframes, especially if they already know who you are and what you invest in. So what does your private lender care about most of all? Here are the four most common factors that a private lender is interested in when deciding whether or not to finance a bridge loan:

1. Trustworthy character: Private lenders especially want to know that they are lending their money to responsible professionals with integrity. Show your lender who you are and why they should invest their trust and their money in you. It is also important to be upfront and prompt in all of your interactions with your lender.
2. A vision and a plan: A private lender will want to know what your vision for your property is and that you have a plan for how to execute that vision. This plan should include an executive summary, photos of the property, and estimates for any renovations.
3. Numbers that make sense: Private lenders may not require as much documentation as a bank lender, but they will still want to see financial statements for you and your business, cost estimates for any planned renovations, and appraisals or other documentation on the property, especially if it is income-producing. Your private lender will want to see how this property or project makes financial sense and that you have a strategy to repay their loan when the time comes.
4. A well-chosen property: The right property can be the most important factor to a private lender as it can make or break a deal. You need to show your private lender why this property will be profitable. Bring photos or arrange for your lender to visit the property if possible.

Hard money or a bridge loan isn’t the right choice for every project, so it’s important to know when it can be a good financial choice. A property that is undervalued or in need of renovations to increase its value can be a good choice for a hard money loan at the beginning of the project. Then, when the renovations are complete and the property is leased-up, it can often be easier to qualify for a long-term commercial mortgage from a traditional lender. A private capital loan can also help if your bank financing falls through at the last minute because private lenders can finance loans in a short timeframe. It can also even be possible to close on a private capital loan in a matter of days, especially if you already have a relationship with a private lender.

If you have a property in need of short-term bridge financing, contact Montegra at loans@montegra.com today to find out more about our private capital bridge loan programs.