Quite often, most commercial borrowers presume that a residential mortgage officer also functions as a commercial lender. But, for the most part, it doesn’t work like that. Residential lending is completely different from commercial lending. Like residential funding, there are several forms of commercial funding. Most residential funders lack the technical know how required to fully process each of the different types of commercial funding.
However, there is an exceptional case where a residential financer is also a commercial money originator. Recently, few residential lending companies have advanced into several forms of commercial funding as well as non-traditional financing types, offering different types of financing to borrowers.
Like the residential lending, the government does not regulate commercial financing. In commercial hard money lenders financing a commercial real estate investor is a big time investor, hence, every investor should look before leaping. Processing a commercial funding always takes a little while longer. Hence it is imperative for a borrower to have a good understanding of commercial funding types for hassle-free borrowing and funding.
Here are the different types of commercial funding:
Small business Administration (SBA) Financing
Small Business Administration loans usually abbreviated as SBA loans are the most common and popular forms of commercial funding programs made available to small businesses, infants and startups by commercial funders. It is very beneficial to individuals and entity who want launch new business ideas but lack the capital to start.
Commercial Financing based on Assets
This is an arrangement whereby the borrowers get their business financed based on some assets of big-time cash worth known as the collateral security. The amount of risk involved in this kind of lending is less compared to the other types of unsecured commercial funding. Unlike the unsecured business funding, the lender doesn’t expect the borrower to compensate for insecurity, thus reducing the interest on asset-based funding.
Cash Advance
There are two types of cash advance: bridge loan and commercial hard money loan. Borrowers usually take bridge loan to secure quick business and real estate opportunities so as to qualify for bigger loan opportunities like commercial hard money loan. A bridge loan is a short terms financing which term doesn’t last for more than two to three weeks. Most borrowers after the three-week term expire look for a commercial hard money lender to clear the bridge loan and offer better loan terms. Both bridge and hard money loans are also property-based.
The major difference between the two is that while hard money is based on legitimate real estate property, bridge money is not. Bridge money is usually characterized by cross-collateralization.
Church Lending
Under this arrangement, commercial money lenders fund either the congregation members or the church itself.
Closing Note
As pointed out earlier, commercial funding is deregulated. For the greater part, a person needn’t be licensed before they can become commercial lenders. Different commercial lenders have different borrowing terms. Some lender’s terms are more rigid than the others. Hence, individuals and entities looking forward to commercial financing should look for the funders who offer the best and simplest terms in order to eliminate all hassles of reimbursement over time.
