Real Estate Financing in Atlanta, GA and Nationwide

Development Loans

Development loans are typically short-term, 1 to 3 years in length, and are used for the development of land including things like; construction of buildings, excavation work, running electrical lines, storm sewers, and roads. Development loans typically require that the property is used as collateral for the loan until it is sold, or can financially support permanent financing.

Unlike a construction loan in which funding is used for building improvements only, a development loan may be used before there are any buildings on the land. Our development loans consist of up to 65% Loan to Value, and low APR, potentially making them the most desirable financing option for businesses looking to fund development projects. Typically, proof of past projects and experience will be required for approval.

Hard Money Loans

Our hard money loans are a great option for funding when a business’s credit score is less than desirable, they have been denied a loan in the past, or they want a lower interest rate or better terms than were offered with an unsecured loan.

How does hard money lending work? Instead of using credit history as collateral, some type of physical property (asset) is typically used to ensure repayment. The definition of hard money lenders is often a private or nontraditional lender that provides hard loans leveraged against a high value asset such as real estate, high value equipment, vehicles or land. Any valuable tangible asset can be evaluated for a potential hard money loan.

Traditional banks do not offer this type of loan which can make it even more difficult to obtain. Our hard money loan rates vary depending on the size and scope of the loan needed and can vary anywhere between 9% to 18%. Applicants will need a 65% – 75% Loan to Value ratio for approval. Hard money financing is typically more desirable and attainable than a traditional loan for businesses who do not meet the criteria for bank loans or that have a lower credit score.
An example of a hard money loan is a business that wants to fund development of a new product, but can’t prove the market. The borrower could offer a piece of investment real estate that they own as collateral for the funds. You may hear about a “collateralized loan” which is another way of saying that property was offered to secure the funds provided by the lender.

Bridge Loans

Most commonly known as a bridge loan, these short term asset based loans are also known as a “caveat loan,” and less often, as a swing loan. The definition of a bridge loan is a short-term loan typically repaid over 3 years with interest only payments during the term and a balloon payment at the end. Business investors may use these loans to act quickly on a property or high value asset while waiting for long-term financing to come through.

To provide an example of a bridge loan, suppose a retailer owns a location on a classic main street, but wants to open a second location in a new development that offers mixed use properties for sale. The business owner could take a bridge loan utilizing their current building as collateral. During the three year term of the loan they would pay interest only, saving money necessary to purchase goods on hand, market the new location and pay employees.

As cash flow is established, the owner can refinance into long-term financing, owning two locations outright, and maybe even having apartments above the second location to sublet to renters. If instead of owning two properties, the business owner simply wants to move the business, that’s an even easier and more traditional example of bridge financing for real estate. The loan is leveraged against the first property, allowing the owner to move the business now. The owner then pays interest only until the previous location is sold, then uses the funds to pay off the bridge loan.

We provide bridge funding options to businesses who are applying for long-term loans so that they can avoid a delay in operations. With low APR, a bridge loan is typically approved for seasoned businesses with experience and a comprehensive portfolio.

Financing an Investment Property

Finding the best loan to purchase investment property can differ greatly depending on your situation and what you are looking to do with it. You can finance an investment property such as residential or commercial real estate to help you create passive income. The question becomes “what is the best way to finance an investment property?”

Many investors also ask what the best loan is for investment property, but there are multiple answers to this important question. As an investor, there are several pathways to source funding for an investment property. There are bridge loans, hard money loans, portfolio loans, fix and flip funding, redevelopment financing, and even SBA owner-occupied loans, among others. Each of these has their pros and cons, and your financial choice can vary depending on the properties you want to buy and their circumstances.

How to Finance a Commercial Property

Commercial Real Estate Financing is typically used to purchase or renovate commercial property or to refinance debt on a currently owned commercial property. To get a commercial real estate loan, most lenders will require that the property be owner-occupied which means you need to occupy at least 51% of the building, otherwise you will need to apply for an investment property loan.

To finance commercial real estate your business has several options, and we’ll cover some of the commercial real estate lending basics right here. If you have an excellent credit score, strong revenue with high margins, and a 20% or greater down payment, you may qualify for a Commercial Real Estate loan outright. If you are missing any of these, one opportunity to move fast is to choose a type of CRE Hard Money Loan called a “Bridge Loan.”

A Bridge Loan leverages owned equity in your current property to finance the quick purchase of a new property. Like other hard money loans, a bridge loan is short term, 1-3 years, with a balloon payment at the end. Most buyers choose this loan type because during the term it is interest only and can be converted to long-term financing at the end of the loan.

Commercial real estate finance also looks closely at the DSCR of real estate investment properties, whether those are funded by residential or commercial real estate investment loans. The Debt Service Coverage Ratio is an evaluation of the income a property generates as related to the amount of debt the property needs to pay off in a given period. If you owe $100,000 per year on a commercial property loan and the property generates $200,000 in revenue each year, you have a DSCR of 2, a suitable rate to cover the loan.

How to Finance a Real Estate Development

Many wonder how to finance a real estate development project and while you most likely will need to pledge some sort of capital, securing financing can make or break the feasibility of your real estate development problem. In many cases, what an investor needs to do is to work with Peach Tree Commercial Capital to develop a comprehensive real estate development financing model. That could mean several types of financing to fund acquisition of land, refinance existing properties into a portfolio loan and create the opportunity to fund new construction.

To fund a real estate development project or construction, a finance model that pays out on construction milestones can be extremely helpful. Your real estate project will have natural phases like laying the foundation, framing the building, completing electrical and mechanical systems, insulating, glazing and roofing, to name a few. Specific trades work on each stage, and it’s helpful to have an inspector cross check the work before funds pay out to complete the next stage. The project finance model protects the real estate investor and the lender from paying out for work that is going to have to be redone at greater expense some time in the future.