Hard Money Specialists · Nationwide
Commercial Hard Money Loans
Commercial deals often move faster, or look more complicated, than a bank is comfortable with. We give free specialist help to investors and business owners across the US and help you explore financing with hard money lenders who fund commercial real estate.
Working on a commercial deal? Tell us about the property, the amount you need and your plan for it to explore specialist financing.
How Commercial Hard Money Financing Works
Commercial deals vary more than residential ones, but most follow a similar path.
Step 1
Share the deal
You outline the property, purchase price or value, current income, any planned work and the amount you need.
Step 2
Initial review
The lender looks at the asset, the location, the rent roll and your business plan, then indicates whether it can help.
Step 3
Due diligence
An appraisal, title review and often environmental and property condition reports are ordered.
Step 4
Terms and closing
If the lender is comfortable, it issues terms, documents are drawn up and the loan closes.
Step 5
Execute the plan
You lease up, renovate or stabilize the property. Improvement funds may be released in draws.
Step 6
Exit
You sell, or refinance onto a bank, agency or other long-term loan once the property qualifies.
What Is a Commercial Hard Money Loan?
A commercial hard money loan is short-term financing secured against commercial real estate. It is typically used to buy, reposition, refinance or pull equity from a property, with the plan of selling or moving onto long-term financing later.
Banks and agency lenders usually want stable occupancy, years of financial statements and a long approval process. Private lenders focus more on the property, its value and the business plan, which helps when a building is partly vacant, needs work or has to close quickly.
Property types include retail, office, industrial and warehouse, mixed-use, larger multifamily, self-storage, hospitality and owner-occupied business premises, depending on the lender.
New to private lending? Our guide to how hard money loans work covers the basics.
How Commercial Loans Are Sized
Loan-to-value (LTV) compares the loan with the property's appraised value today. It is often the main limit on a commercial bridge or acquisition loan.
Loan-to-cost (LTC) matters when the deal includes improvements. It compares the loan with the purchase price plus the cost of the planned work.
Net operating income (NOI) is the property's income after operating expenses, before debt payments. It drives the value of most income-producing commercial property.
Debt service coverage (DSCR) compares NOI with the loan payments. Short-term lenders may accept low coverage today if the plan improves it, but the long-term lender you refinance with will look at it closely.
Stabilized value is what the property should be worth once leased up or improved. It shapes the exit and sometimes the loan size.
Recourse describes whether you are personally liable beyond the property. Terms vary, so read the guarantee section carefully.
Exact limits vary between lenders and deals, so treat any figure you see online as a starting point for conversation rather than a promise.
Working on a commercial deal? Tell us about the property, the amount you need and your plan for it to explore specialist financing.
Example Commercial Financing Scenario
Hypothetical scenario
- Purchase price
- $1,200,000
- Planned improvements
- $150,000
- Estimated stabilized value
- $1,600,000
Say an investor agrees to buy a small retail center for $1,200,000. Two of its units are empty, which is part of why the price is attractive and why a bank is reluctant. The investor plans $150,000 of improvements and expects the center to be worth around $1,600,000 once fully leased.
A lender would start with the property: an appraisal of its current value, a review of the existing leases and tenants, and a look at the local market for similar space. It would then test the business plan, including how long lease-up is likely to take and what the improvements involve.
Based on its own LTV and LTC limits, the lender would decide how much of the purchase and improvements it would fund. The rest would be the investor's contribution, plus closing costs, reserves for interest and leasing costs.
The exit matters most. Once the center is stabilized, would its income support a long-term refinance large enough to repay the loan? Actual loan amounts, pricing and contribution depend entirely on the lender, the property and the borrower.
What Commercial Lenders Look For
The asset
Property type, condition, location and how easily it could be sold or re-let.
Income and leases
A current rent roll, lease terms and tenant quality, or a credible plan to fill vacancies.
Business plan
What you will change, what it costs, how long it takes and why it adds value.
Your experience
Your track record with similar property, or the experience of your management team.
Your contribution
Cash or equity in the deal, plus reserves for interest, leasing and capital work.
Exit strategy
A sale or refinance that works on realistic numbers, with time to spare before maturity.
Commercial Loan Costs and Considerations
Commercial hard money costs more than long-term bank debt, and commercial due diligence has its own costs. Rates and fees vary widely, so get every figure in writing.
Interest
Usually interest-only during the term. Ask whether it is charged on the full loan or only on funds drawn.
Origination fees
Points on the loan amount, typically paid at closing.
Third-party reports
Commercial appraisals, environmental reports and property condition reports can be significant.
Legal costs
Commercial loan documents usually involve attorneys on both sides.
Leasing costs
Tenant improvements, commissions and free-rent periods affect how much cash you need.
Exit fees and extensions
Some loans have exit fees or prepayment terms. Check the cost of extending if lease-up takes longer.
Before you commit, test the plan with slower lease-up, higher costs and a lower exit value. Our hard money loan calculator can help you estimate interest and points. Open the calculator.
What to Have Ready
Having this ready makes the first conversation faster and helps a specialist point you toward the right lender.
- Property address and purchase contract, or current value if refinancing
- Current rent roll and copies of key leases
- Recent operating statements or a summary of income and expenses
- Your business plan, including any improvement budget
- A summary of your experience with similar property
- Proof of funds for your contribution and reserves
- The entity you will hold the property in
- Your planned exit: sale or refinance, and when
Compare other options on our loan types page, or read about how our process works.
Frequently Asked Questions About Commercial Hard Money Loans
Talk to a commercial financing specialist
Working on a commercial deal? Tell us about the property, the amount you need and your plan for it to explore specialist financing.
Get your financing options
Share the basics and a specialist will review your options with you. All credit considered.