Commercial Real Estate

real estateTraditional bank financing of commercial real estate projects often comes with burdensome requirements, and frequently takes months to complete. Although banks generally offer lower lending rates, they are usually inflexible in their lending. They often refuse loans for certain types of property or exclude companies in certain industries.

Private lending sources can fund projects that fall outside bank lending criteria, but that make good business sense. Private loans or joint-venture arrangements may come from wealthy individuals, investment groups, or more sophisticated financing organizations, including “hard money” lenders and private equity companies.

A mezzanine loan or an equity capital investment from a private lender can supply needed cash to fill remaining gaps. Private equity funders are quite versatile and can provide creative, flexible financing solutions, but they expect a good return on investment.

For construction and commercial real estate projects, other alternative financing options may be available:

  • Stimulus Money: Many stimulus programs available from state and federal governments may assist the commercial real estate investor, developer, or business owner.
  • U.S. Small Business Administration (SBA): SBA loans are actually increasing in today’s economy. Government guarantees have increased to 90% as part of the recovery act. The SBA’s 504 program is a useful investment vehicle for owner-occupied business real estate. It allows the owner to put down as little as 10%.
  • Seller Financing: Many commercial real estate owners need to sell properties to cover expenses of maintaining another property that is under performing. Often these owners are forced to sell because they cannot refinance. Many will consider offering seller financing at affordable rates.
  • Friends and Family: It can be awkward and uncomfortable to ask a relative for a loan. The interest rate on a friend or family loan may be higher than a bank but lower than a credit card. However, an advantage of a family and friend loan is that you will not have to qualify with your credit score.
  • IRA and Retirement Accounts: It is now easier to tap into retirement accounts to purchase real estate. There are legal services that enable business owners and real estate investors to transfer funds from their 401(K) and IRA to a C corporation. Once the funds are deposited into a C corporation, they can be used to purchase real estate without paying taxes or penalties due to the transfer. Before making such a transfer, however, it is important to consult a tax professional to ensure that you abide by all laws and regulations.

At ProActive Capital Funding, we request the following types of business and personal information to thoroughly understand your project and identify funding sources most likely to meet your needs:

  • Specific amount of investment/funding requested
  • Purpose for the request: Describe the project and how the money will be used.
  • Specific details: Explain why it is a good project.
  • Timetable for the needed funding and the schedule for the project
  • Collateral and repayment plan:  How much have you personally invested in the project to date?  How much will you invest?  Describe your financials, collateral, debt, etc. Is the collateral unencumbered?  Provide enough information so that lenders can determine if this project has a solid foundation.
  • Exit Strategy
  • Background information on the principals involved in the project:  Briefly describe their experience and track record.
  • The firm/company and industry:  Describe the product, service, patent, etc., you provide.
  • Available documents: Provide a list of documents that you can provide to support the request (spreadsheets, proforma, revenue projections, business and marketing plans, biographical information on the principals, etc.). If we determine that we can help with your project, we will likely need to review these documents for more detail.

For additional information, contact:

Ray King <> The ProCoach
Phone: 832-615-9124 * Fax: 832-615-9570
Email: Ray@TheProCoach.com