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The Better Alternative: Seven Reasons Private Equity Lending is Preferred..

by  | Corporate
Posted:     Updated: Oct 19, 2017  1:04 ET
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Where conventional lenders and banks cannot, private equity lenders and brokers can. Whether interested in securing cash flow from single-family residence investing, refinancing multi-level office building or purchasing a retail space in a prime downtown location, private equity facilitates commercial real estate financing needs. The following gives reason why “hard money” or private equity is the preferred alternative lending source.

1. Faster commercial loan approvals and funding...

With traditional conventional lenders, securing a commercial loan may require months. As seasoned commercial real estate investors understand, once a subject property is on the market, the purchase window or timeline is short. Yet, applying for a private equity or alternative loan is a faster process. This process provides funding within critical timeframes. After completing a commercial loan application and providing necessary due diligence, within days, a reputable lender may fund a commercial private equity loan.

2. Less financial documentation...

As a part of the underwriting process, traditional lenders need evaluate financials associated with a business or subject property. However, for real estate investors (whose financials may not be available), this requirement can prove prohibitive. Commercial private equity money lenders do not require business financials-basing the loan on viability of the opportunity and collateralized by the subject property.

3. Stronger purchase offers...

Individuals involved with real estate have experienced (or learned of) a situation in which a bank wrenched financing from an investor during escrow. This possibility is inconvenient and endangers the opportunity for final purchase. Because private equity lenders are focused on asset-based lending parameters; i.e., the value of the collateral anchoring the loan request, these are less likely to deny funding.

4. Leveraged negotiations...

Real estate deals move quickly. This movement impacts price points. When purchasing investment property, if multiple parties are interested, in negotiating price, those with funding from conventional lenders are often at a disadvantage. However, with private equity funding, by guaranteeing a shorter escrow period and a faster close, investors can better negotiate price.

5. Protect liquidity...

When making an offer, cash purchases are preferred. These can buy real estate at all-cash auctions, secure lower prices and negotiate favorable terms. Still, purchasing a property in cash encumbers funds and mitigates other immediate purchases. For those who pay in cash, as a workaround, a commercial private equity loan can provide immediate financing-while maintaining cash liquidity.

6. In lieu of credit blemishes...

For anyone seeking financing, with conventional lenders, a host of issues within a borrower’s credit history thwarts receipt of needed financing. Past bankruptcies, loan modifications, foreclosures and other credit determining factors impact a lending decision. Still, for private equity lenders, loans are not approved based on “credit worthiness”. Because alternative lenders utilize asset-based loan programs, the emphasis is on the viability of the opportunity and value of said asset.

7. Flexibility to customize a loan package...

To avoid risk, as one of many methods, with lending regulations, conventional lenders are rigid. Often, for seemingly arbitrary factors, investors are denied loan approval. Private equity lenders have independent lending criteria. Should there be a specific challenge-preventing loan approval, the private equity lender is more inclined to consider favorable solutions.

To learn if a property qualifies for an alternative commercial real estate asset-based lending program; for conversation and value-added service, contact: 216-373-7539

Topics: Commercial hard money | Commercial lending
More by: LUCEV Finance & Investment Group


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The Better Alternative: Seven Reasons Private Equity Lending is Preferred..

by LUCEV Finance & Investment Group | Corporate
Posted: Aug 14, 2017  10:11 ET    Updated: Oct 19, 2017  1:04 ET

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