A commercial mortgage can take some real time and patience to get into place from a bank or institutional lender, mainly because of all the due diligence and funding conditions that can come with a commercial mortgage.
This is in keeping with the reality that cheaper money is lower risk money and slow to get into place as a result.
Sometimes the requirements of the commercial mortgage lender are also too rigid for the intended purpose of the borrower, making commitments that end up being presented to the borrower basically useless.
If you understand what the typical commercial mortgage requirements are, you can try and mold your deal to fit the money.
Most business people think that commercial property lenders are fairly pliable with their programs and will bend a bit here and there to make a deal work.
The reality is that most commercial lending criteria and requirements are quite rigid and inflexible and if you can’t fit the box, you don’t get funded.
While this may appear to be unreasonable, it does make sense in that lenders have to manage risk through applying a very specific model. If they stray too far outside of what they know will work or be manageable, they set themselves up for failure, and there’s plenty examples of failed banks and lending institutions that strayed too far away from prudent risk management strategies.
So when you have a workable deal that doesn’t quite fit into a bank or institutional lender’s box, the next best alternative can be a private mortgage lender.
The private money lender has the same types of risks to deal with, but likely doesn’t have the collective exposure of a major bank, and tend to micro manage their risk position a lot better, so customizing a commercial mortgage commitment to fit your requirements on a deal that makes financial sense can be very possible to achieve.
Private money is likely going to be more expensive, but it may come down to moving forward at a higher cost of capital or not moving forward at all.
If there is room in your margin or returns to cover the cost of a private commercial mortgage in the short term with the potential of getting refinanced with cheaper money within one to three years, then private money may be the better approach versus wasting months and perhaps years trying to get a bank or institutional lender to bend enough to fund your deal with cheaper money.
If you are in need of a commercial property mortgage and want to better understand your private mortgage alternatives, I suggest that you give me a call so we can go over your requirements together and discuss private commercial mortgage options that meet your requirements.