• Conventional Loans for all classes of commercial real estate including retail, office, industrial and multi-family properties.  These loans could be funded by local community banks, national banks, insurance companies or private equity and hedge funds.  The allowable loan to values (the loan value as a percentage of the total market value) are typically no higher than 75 or 80%.  Loan terms are typically 5 to 10 years with amortization periods (to determine the monthly payment) of  20 to 30 years.

 

• Bridge Loans provide short term financing (6 to 36 months) to allow a borrower the time to overcome some current deficiency that disqualifies the transaction for conventional financing.   Bridge loans are often used for commercial real estate purchases to bridge from the current situation to a future period in which the property would be in a better situation to secure more favorable, long term financing.  Examples would include when a property needs to close quickly, retrieve real estate from foreclosure, to fund a rehab project or take advantage of a short-term opportunity in order to secure long-term financing. Bridge loans on a property are typically paid back at a time when the property is sold, refinanced with a traditional lender, has completed renovation or construction improvements.  Or bridge loan can be retired with new financing when the borrower's creditworthiness improves or there is a specific improvement or change that allows a permanent or subsequent round of mortgage financing to occur. The timing issue may arise from project phases with different cash needs and risk profiles as much as ability to secure funding.

 

• A bridge loan is similar to and overlaps with a Hard Money Loan. Both are non-standard loans obtained due to short-term or unusual circumstances. The difference is that hard money refers to the lending source, usually an individual, investment pool or private company that is not a bank in the business of making high risk, high interest loans.  Whereas a bridge loan is a short-term loan that "bridges the gap" between longer term loans.  Bridge loans also may be used for commercial mortgage discounted note financing.

 

• Government Loans including (SBA 504).  A popular resource for small business owners is the SBA 504 loan program.  When dealing with long-term equipment or owner-occupied real estate purchases, the SBA 504 loan program is geared towards reducing the traditional required down payment.  Traditionally, banks require between 20%-30% as down payment.  The main benefit of the 504 loan program is the borrower is required to put in as little as 10% towards the project and the SBA will provide up to 40% of the purchase (up to $2 million) on a longer-term (20 years for real estate and 10 years for equipment) basis.  

 

• HUD (US Dept. of Housing & Urban Development) Loans for construction, apartment buildings, student housing, assisted living & medical facilities.  HUD has long been the prevailing government source of capital for these specialized housing projects, providing both construction and permanent loans for these properties since the 1960’s.  Construction capital was severely limited in recent years as the worldwide economy contracted and the prolonged recession reduced the ability of commercial banks to provide financing. The capital pool available to these types of housing developers has been further restricted by the small number of financial institutions comfortable underwriting the unique characteristics of these properties.  Through programs offered by HUD, developers can obtain their construction financing and the subsequent permanent financing with an amortization period of up to 40 years and attractive loan to costs. 

 

• CMBS (Commercial Mortgage Backed Securities) Loans. This type of financing (sometimes referred to as conduit loans) is used for commercial real estate starting at $1.75 million and up although the bulk of these loans are $4-$5 million or greater.  CMBS loans are typically non-recourse with fixed rates up to ten years, thirty year amortizations, and 75% loan to value. This type of financing for commercial real estate is intended for situations where a borrower is looking for long term financing, so there can be substantial penalties for paying off the loan early.​

​