Different Types of Commercial Loan Financing

Commercial Lending in This Economy
November 24, 2017
Hard Money Commercial Loans
November 27, 2017

Different Types of Commercial Loan Financing

fast money hard money at level 4 fundingCommercial loan financing simply means financing for businesses—a broad term that encompasses several forms of commercial lending. These include commercial real estate loans; loans on equipment, inventory and accounts receivables; and unsecured lines of credit.

Commercial loan financing for real estate is the most widely known of all forms of commercial financing. There are several sectors included in this segment which include: multifamily or apartments, industrial such as warehouses and distribution centers, offices, and retail. Single family units that are rentals or fix-and-flippers are, surprisingly, not considered commercial loans but residential. This is because government agencies such as Fannie Mae guarantee loans on properties with four or less units. They all have one thing in common: they all generate income. Currently, the hot segments for commercial real estate include multifamily and distribution centers.

Another segment that is hopping, even though it is considered residential, is the fix-and-flip industry, in part due to the popularity it gained following HGTVs foray into reality TV featuring various individuals that make their living through this real estate model. We’d like to point out that reality is often missing in “reality TV” and finding success in this model takes a deep knowledge base, a strong work ethic, and a lot of patience. That being said, those that know their markets, have a background in construction, understand budgets, and have their real estate license, or at least have a good real estate agent on their team, can find success.

The other types of commercial loan financing such as equipment, inventory and accounts receivables are primarily sought out by businesses that need working capital or support getting through the non-peak seasons. Funding for accounts receivables usually comes in two installments. The first one is funded when your invoices are submitted and is usually at about 85 percent of their value. The second one is received once these invoices are paid by your customers. When you use inventory as collateral it must be verified by the finance company. In addition, lenders often finance based on 50 percent of the forced liquidation value which is much lower than the market value of your inventory.

Alternative Lenders

If your credit score is less than perfect or your debt-to-income ratio is high, it will be difficult to obtain traditional commercial loan financing. A private hard money lender is an alternative that many turn to when they are turned down by banks, credit unions or other lenders. Loans from these types of lenders are based on the hard asset and less on the creditworthiness of the borrower.

Private hard money loans are, as their name implies, hard-asset based.

At Level 4 Funding, we provide business, fix and flip, buy and hold, construction, bridge and commercial loans for all sectors. Our loans fund in as little as a few days and are based on collateral. We develop long-term relationships with both investors and developers who turn to us time and again for their commercial lending needs. Call us today for a no-obligation quote.

Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
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About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

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