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Commercial Lending | Differences Between Private Lending and Institutional Bank Commercial Lending

You have found the perfect property. It’s in a great location. It has great earnings potential. It has a history of profitability and it’s priced at a point that is too good to pass up. You’ve found the property, but now you need to find a lender, and commercial lending is a complicated arena with a lot of choices, along with factors that go into deciding which one is right for you.

Choice Between Private and Bank Lending

One of those choices you’ll need to make is between private commercial lending and bank funded commercial lending. Private lenders are companies of all sizes with a lot of capital that tend to invest specifically in commercial businesses, while institutional banks tend to run financial services for individuals and companies all over the world.

There are significant differences between them for the borrower, and these differences may alter your decision about who to go to for funding. While we’re all familiar with banks, private lenders:

  • Often Work Regionally – While national private lenders exist, most stick to a specific region. For example, you may find a California private lender, or a private commercial lending company in a specific city, like San Francisco.
  • Often Have a Niche – Once again, there are some commercial lending companies that fund anything they have interest in, but most have a niche. For example, a commercial lending company may only fund hotels, or they may only fund large apartment complexes, etc.
  • Set Their Own Guidelines – Private lenders often decide on their own fees and their own loan structures. In some cases these terms will be to your advantage. In other cases they won’t be. That’s why shopping around is so important.
  • Move Quickly – Private lending tends to move much faster than public/bank commercial lending, provided everything is prepared in advance. Indeed, in some cases a private lender may not like to take their time, and is more likely to close on a loan where everything is in order already.
  • Use Their Knowledge – Finally, in commercial lending, your rate is often based on potential earnings assessments, property value, and more. Because private lenders have a better understanding of specific niches and regions, they are more likely to use their knowledge in your transaction – to your benefit or detriment, depending on the property.

Now that bank commercial lenders are becoming tighter with the loans they’ll accept, it’s becoming more and more important to at least look into private commercial lending.

At CRE Lender, we believe that your needs are unique to you. That’s why we do not assume any option is best until we’ve had an opportunity to look at your specific loan and figure out which options work for your needs. If you’re interested in finding out more about the loan options available or getting started on your own commercial loan, sign up with CRE Lender today.

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