In plain terms, these type loans are simply business financing that a corporation or private business other than a bank provides. They are built to cover areas not funded by conventional lenders, which includes most mortgage companies also, whose loan structuring and underwriting rules are tightly composed with very little of what is commonly called ‘wiggle room.’
Without the concrete regulations of conventional lending, Arizona commercial private loans can take care of practically any business financing need. And also without a high risk level for either lender or the borrower.
This advantage tends to be a real standout since around 60 percent of bank loan applications are rejected due to the hard and fast rules governing approval. Even a mid-level credit score can put a glitch in the procedure. A bankruptcy (even an old one) or foreclosure can generate a red negative for applicants, who are now back where they started from and possibly with six months of time lost.
Private loans tend to fall on the upper end of the spectrum with the approval rating reaching as high as an average of 85 percent. Other positive aspects of this type funding include less paperwork to be submitted, fewer covenants and closings that don’t stretch out over six months.
Small business owners tend to be a major portion of the applicants for this type funding, since their capital tends to be small due to the investments, they have already made to just get the business off the ground and running.
A side advantage that most borrowers don’t think of until it’s already done is that private loans can be used for almost any purpose. A worst case scenario of traditional lending can look like this: one applicant presented every document demanded, met all the qualifications, got approved and waited three months for closing—only to be handed a list of things he couldn’t spend his just-signed for money on and one of the three was exactly what he planned to do with the project in mind.
What are the dangers related to Arizona commercial private loans?
The ‘but’ in taking out one of these loans is that you will pay for it—literally. Interest rates are quite a bit higher than mortgage companies or banks due to the higher risk taken out by the lender. The further up the scale the chances are of having no or only some return on the money, the larger the interest rate becomes. Conventional lenders stay within their boundaries, taking few chances and offering lower interest percentage rates. You will need proof that your business can generate revenue also, so make sure it is available for the lender to review.
Do your homework—dig into the all of the aspects involved in commercial private loans. Both you and the lender are looking for this to be a positive experience. After all, you might need a helping hand in the future with another business idea.
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: 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 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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