Financing for commercial real estate is a completely different game when compared to residential mortgage loans. It moves much faster and is much more flexible.

Commercial Real Estate – Hard, Hard, Hard Money Loans

When purchasing commercial real estate, financing is the most significant factor in determining whether the project is worth pursuing. Although there are a variety of commercial real estate loans on the market, we are going to look at hard money loans in this article.

Hard money loans for commercial real estate are often a matter of last resort. They aren’t good deals, but they can save a financing situation that has gone critical. Most hard money loans come with significant upfront costs and astronomical interest rates. When you are facing the prospect of losing a commercial property, however, they can be a godsend because they also are granted very quickly.

Hard money loans are considered very risky and are issued by private financing groups, not banks or lenders. The loans tend to be only available as the primary loan on the property, which isn’t that rare a situation in commercial property.

Unlike home loans, hard money loans are all about the potential sales price of a piece of commercial real estate. The party considering lending you money is not going to look at the appraised value of the property. They are going to look at the probably sales price if the commercial real estate has to be sold a few months after making the loan. Depending on the condition of the property, this figure will typically be between 50 and 75 percent of the appraised valued of the commercial property.

Put another way, a hard money loan is a short-term loan designed to get you past an immediate problem. It is undeniably a loan of last resort and is not an ultimate solution to a financing problem with a commercial property. It does nothing other than buy you time, and at a fairly hefty cost. If you are in a tight spot and can resolve the problem with a few extra months time, a hard money loan may be the answer.

Is it actually possible to get ‘ creative ‘ when considering a franchise finance business loan for you new Canadian role as an entrepreneur in franchise financing? There are some tried and trusted rules we use in the franchise lending area, but a little creativity has never hurt anyone we believe!

If you haven’t considered how to finance your new business in the franchise industry then we feel it’s probably a little too late in some ways, as your ability to finance your business properly we think has a lot to do with the ultimate growth and success of your business. There are very focused lending sources for the franchise area of financing in Canada – the trick of course is to know what they are and more importantly how you can navigate the ‘ maze ‘ successfully.

The reality is that if you have some industry experience in your new business and a proper finance plan you have a much better chance of financing your business properly.

So, who can you turn to in terms of creativity and resources for franchise financing? Clients are amazed when we tell them the most creative partner in franchise financing in Canada is none other than the Canadian government!How could that possibly be? Simply because a program guaranteed by the government and administered by the banks could not be any more creative than this.

The program is the ‘BIL’ loan program, and it provides you with financing up to 350k for your new business. Are the terms onerous? Hardly! The essence of the program is a 5-7 year term loan, with great rates, limited personal guarantees, and some other elements of flexibility. If that isn’t creative then we don’t know what is!

Naturally all the creativity in a business loan of that type for your franchise finance scenario should not be reliant on just one lender – the other lender is someone you know very well. Yourself. That’s simply because when you look at the total financing of a franchise in Canada the two components are simply debt (the funds you have borrowed) and the equity, or money you have put in yourself. These equity funds, i.e. your commitment to the business, typical come from savings, the proverbial ‘ friends and family ‘ support, and investments or collateral that you have available.

Getting back to our key subject of creativity, our above noted BIL loan program only covers certain aspects of a franchise finance scenario. You can augment that loan with flexible equipment financing that has low down payments and extended amortization terms, as well as, in some cases, a working capital term loan.

We never forget to remind clients that the franchise financing plan is a two stage process, acquiring the business, and making sure they have some capital and funding to operate and grow their new business.

In summary, you can be creative when you are looking for info on how Canadian franchise finance works. You need knowledge on what funding sources are available that are specialized to the franchise industry, and assistance in executing a proper financial plan. Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in maximizing that creativity!

Real estate investors rely on the properties that they purchase to produce income. While a strong buyer’s market certainly favors investors, it does take a great deal of financial savvy to successfully navigate real estate investments. After all, conventional financing, such as the FHA loans used to purchase residential homes, often aren’t available to investors. Instead, many investors turn to private money lenders – also known as hard money lenders – to finance their purchases.

Hard money loans, which are also called private money or equity-based loans, are designed to meet the needs of real estate buyers who can’t use traditional financial products. In many cases, banks and other lending institutions won’t finance real estate purchases because they don’t meet stringent criteria about the types of properties that qualify for financing. In other cases, individuals are unable to secure financing because of past foreclosures or credit problems.

Buyers and investors who want to purchase real property but don’t qualify for traditional financing may be able to utilize this type of private financing. Before you apply for one of these private loans, it’s essential to understand what types of products are available.

Fix-and-Flip Loans

True to their name, fix-and-flip loans are designed for investors who want to buy properties, rehab them and sell them at a profit. These homes often don’t qualify for FHA financing because they need too much work. Fix-and-flip loans are widely used across the nation and can be utilized by both new and experienced investors. Most hard money loans designed for fix-and-flip properties can be used to finance both the purchase price and the cost of repairs. These loans may also be referred to as residential or commercial rehab loans.

Bridge Loans

Bridge loans are a type of private money loan used by business owners to cover gaps between their operating expenses and available funds. A business owner might choose a bridge loan to pay a big COD or to own a property free and clear. These loans are also a good alternative when a bank won’t refinance a mortgage.

Ground-Up Construction Loans

Some investors want to build innovative properties but can’t find the financing to do so. Private financing for ground-up construction can provide the funds needed to purchase land and complete construction projects. These types of loans are often used by investors and business owners who want to build specialty properties that are difficult to appraise or are perceived by traditional lenders as high risk.