There is more capital available for qualified developers now than there has been at any other time in the modern economic era.
If you are looking for a commercial real estate or construction loan in excess of five million dollars, you may get the best terms when trying to acquire through a bank. If for one of several reasons you find that the bank won’t finance you, your next move will likely be to turn to investment managers and private debt lenders in the mid-market.
There is a much smaller list of commercial real estate construction lenders that are willing to loan over five million dollars than there is for those under five million.
Banks will still look at the same factors but will require a much higher level of collateral than with smaller loans. Private money lenders in the industry will still look primarily at how successful the project sponsor has been with past projects.
Private money lenders have become more favorable in the industry based on how quickly they are able to make a decision and lend money, as well as their ability to write non-recourse loans.
At mid-market list, we have an encompassing list of real estate construction loan companies that can be sorted and filtered to find the companies that operate in the construction industry. In addition, developers looking to be put into contact with the right commercial lending company can fill out the contact form on our get a commercial real estate construction loan page.
If your team has a track record of success in construction and development, give us the specifications of your project and we will match it with the appropriate lending institution.
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Deed Secured Construction Loan
Commercial construction loans can be secured in a number of ways. Because mid-market lenders aren’t banks, they will likely want the loan secured against the deed of the company as opposed to holding the borrowers personally liable. This furthers the access to capital that is available to borrowers and allows them to forgo the scary process of signing a personal guarantee for the loan.
Hard Money Loan
Because hard money loans use the asset as collateral (commercial real estate in this case), the terms most often do not call for the borrowers to sign a personal guarantee. This is the majority of construction loans from private equity companies.
Private Money Loan
The two term are used synonymously for real estate lenders and real estate construction lenders. Virtually all loans acquired from a private equity company will be private money.
Bank Construction Loan
Every developer who is worth their salt has a network of bankers that can finance their projects. However, when projects run out of money, can’t finance a project or want the borrower to sign a personal guarantee, it may make sense for the borrowers to pay a few points more in interest in order to have the loan secured only by the property that is being developed.
Non-recourse Financing for Construction Loans
Because most mid-market real estate lenders are well versed in evaluating the viability of the project and the capabilities of the sponsor, they typically don’t require the borrowers sign corporate or personal recourse. The property that is being developed is the asset that secures the construction loan.
Most often, these lenders will give favorable terms to qualified sponsors who are looking for construction to permanent loans. There are also firms that specialize in stepping in to projects that have stalled or run out of capital.
Fix and Flip Construction Loans
Qualified real estate development sponsors can turn to mid-market lenders for fix and flip construction loans over 5 million. Typically, the lender will require the property deed as collateral and will give the borrower better terms if they are willing to convert the construction loan to a permanent loan upon stabilization.
Look through our book of lenders at Mid-Market List and contact those lenders that meet your specs.
Because bridge loans lend themselves to a quick return of capital to the lender, there is no shortage of boutique private lenders willing to make their capital available to qualified buyers. Of course, once the project is complete, the risk is mitigated for the lenders and the trust of the real estate is the lenders collateral.
The spectrum of private equity companies, family offices and hard money lending companies lends itself to companies having different mandates. There are companies that look for low-volatility and are willing to accept a lower return. Conventional real estate financing could lend itself to a company with this mandate. If you are looking for traditional real estate construction financing, you