We at Commercial Lending USA know how important it is to get the proper credit for your commercial property goals. Having the right capital can make all the difference when you’re looking to buy, fix up, refinance, fix and flip, hold and sell, or rent commercial real estate to make money. Banks and credit unions have been the best places to get business property loans for a long time. The scenery is changing, though. Alternative commercial lenders are becoming more popular because they offer a more comprehensive range of loan options and may be able to approve loans faster.
But are alternative loans suitable for everyone? With this blog, you can learn all about the pros and cons of alternative commercial lenders and make an intelligent choice.
What is an Alternative Commercial Lender?
Commercial Lending USA is a correspondent lender. We work with a network of traditional and alternative lenders to find our clients the best loans possible. An alternative commercial lender is any non-bank financial company that gives loans for business property. This can include a lot of different people, like:
- Private lenders are individuals or entities with funds to invest in real estate projects.
- Hard money lenders specialize in short-term, high-interest loans backed by the property.
- Crowdfunding platforms connect borrowers with a large pool of investors contributing to the loan amount.
- Specialty finance companies focus on specific industries or property types, like healthcare facilities or student housing.
Traditional vs. Alternative Commercial Lenders: A Tale of Two Approaches
Before diving into the specifics of alternative lenders, let’s establish a baseline by comparing them to conventional lenders like banks and credit unions. Here’s a table summarizing the key differences:
| Factor | Traditional Lenders | Alternative Lenders |
| Loan requirements | Stricter credit score requirements, higher down payment demands, and focus on a solid financial history and business plan. | More flexible credit score requirements potentially lower down payments and may be more open to considering unique situations. |
| Application process | Lengthy and complex application process, requiring extensive documentation. | The streamlined application process, often with less paperwork. |
| Funding speed | Slower funding timelines are due to a thorough underwriting process. | Faster funding times, sometimes within weeks or even days. |
| Loan terms | Typically, they offer lower interest rates and longer loan terms. | May offer higher interest rates and shorter loan terms. |
| Flexibility | Less flexibility in terms of loan structure and terms. | It may offer more flexibility in tailoring loan terms to specific needs. |
The Attraction of Alternative Lenders: Showing You the Pros
So, what makes alternative commercial lenders so appealing? Let’s explore some of the key benefits:
- Faster Funding: Time is often of the essence in commercial real estate deals. Alternative lenders can get you the capital you need quicker, within a few weeks, compared to the months it might take with a traditional lender. This can be crucial for seizing time-sensitive opportunities or closing deals before competitors.
- Flexible Requirements: Traditional lenders might be a closed door for borrowers with less-than-perfect credit scores or limited business history. Alternative lenders can be more forgiving on credit scores and down payments, making them a viable option for a broader range of borrowers.
Additional loan options
Alternative lenders offer a more comprehensive range of loan items than traditional lenders. There are hard money loans, bridge loans for quick cash needs, and SBA loans backed by the Small Business Administration. This lets you find a way to pay for your project that works with your schedule.
Focus on Specific Sectors
Some alternative lenders specialize in financing for niche industries or property types. If your commercial property falls into a less traditional category, an alternative lender with expertise in your sector can be a valuable resource.
Beyond the Shine: Potential Drawbacks of Alternative Lenders
While alternative lenders offer attractive advantages, it’s essential to be aware of the potential downsides:
- Higher Interest Rates: The convenience and flexibility of alternative financing often come at a cost – higher interest rates compared to traditional lenders. Carefully evaluate the interest rate and total loan cost before committing.
- Shorter Loan Terms: Alternative lenders may offer shorter loan terms than conventional banks. This means higher monthly payments and potentially less flexibility in managing your cash flow.
- Potential for Predatory Lenders: The alternative lending landscape can be less regulated than traditional banking. Be cautious of lenders with aggressive tactics or unclear loan terms. It’s crucial to choose a reputable lender with a transparent track record.
When is an Alternative Lender the Right Choice?
Now that you know the pros and cons, how do you know if an alternative loan is right for your business? In the following cases, they might be a good choice:
- Bad Credit or Limited Business History: A traditional lender might reject your application if your credit score is better or your business is relatively new. Alternative lenders can be more open to working with borrowers in these situations.
- Fast Funding Needed: If you need capital quickly to secure a deal or complete a renovation, the faster funding timelines of alternative lenders can be a significant advantage.
- Unique Property Type: If your commercial property falls outside the traditional categories (e.g., a historic building or a cannabis dispensary), an alternative lender with experience in your niche might be a better fit.
A Walkthrough of Commercial Lending USA
We know it can take much work to determine how to get business real estate financing at Commercial Lending USA. That’s why we work with a group of conventional and non-conventional providers. This lets us look at all of your financing choices and choose the one that fits your goals and project needs the best. We can help you:
- Evaluate your financing needs and eligibility: By understanding your project scope, financial situation, and desired timeline, we can assess your fit for different lending options.
- Compare loan offers from various lenders: We leverage our network to present you with competitive loan offers from traditional and alternative lenders, allowing you to compare interest rates, terms, and conditions.
- Navigate the application process: We can guide you through the application process, ensuring you have all the necessary documentation and present your case in the most favorable light.
Use our expertise instead of going it alone.
It can be hard to figure out how to finance business real estate independently, but you don’t have to. For a free assessment, call Commercial Lending USA right now. Our skilled staff will help you determine your financing choices and get the money you need to reach your business property goals.
In Conclusion
Alternative commercial lenders are an excellent choice for people who want faster Funding, less strict requirements, and a more comprehensive range of loan products. But it’s essential to know the possible downsides, like longer loan terms and higher interest rates. You can make an informed choice and get the financing you need for your commercial property projects by carefully weighing the pros and cons and getting advice from professionals with a lot of experience, like Commercial Lending USA.
FAQs
What are the most significant advantages of using alternative commercial lenders?
Alternative lenders can offer several advantages, including:
- Faster Funding: They often have quicker approval times and funding processes than traditional banks.
- More flexible requirements: They may be more forgiving on credit score and down payment requirements.
- A more comprehensive range of loan options: They can offer various loan products like hard money, bridge, and SBA loans.
- Focus on niche sectors: Some specialize in financing specific industries or property types.
What are some potential drawbacks of using alternative commercial lenders?
While attractive, there can be downsides to consider:
- Higher interest rates: The convenience and flexibility often come at the cost of higher borrowing rates.
- Shorter loan terms: Loan terms might be shorter, leading to higher monthly payments.
- Potential for predatory lenders: Be cautious of lenders with aggressive tactics or unclear terms. Choose reputable lenders with a transparent track record.
When might an alternative lender be a good fit for me?
Alternative lenders can be a good option if:
- Your credit score or business history could be better.
- You need fast Funding to secure a deal or complete a project.
- Your commercial property falls outside traditional categories.
How can Commercial Lending USA help me find alternative commercial lenders?
We work with a network of both traditional and alternative lenders. We can help you:
- Evaluate your financing needs and eligibility.
- Compare loan offers from various lenders.
- Navigate the application process.
What is the next step if I’m interested in exploring financing options?
Contact Commercial Lending USA today for a free consultation! Our team will help you explore all your financing options and secure the capital you need for your commercial property goals.
