There are basically 2 options for borrowers looking for commercial rehabilitation loans for commercial construction projects - conventional construction loans or commercial hard money. Both options have their good points and bad points though. The key benefits with commercial hard cash include speed of call and speed of execution.
The downsides are clear ; they're costly and frequently carry tough terms. Now , Apr 2008, the taste for non-public construction loans is fading as hard money lenders remain inundated with loan request as bank financing and cmbs financing continue to feel the heat of the credit "crisis" ; and continue to turn deals down that were financeable just three -6 months back. Hard cash banks are cherry picking and frequently will select loans that don't have the intricacy and inherent risk that goes together with rehabilitation financing - like good old refinances. Except for solid project, in good markets with good borrower experience, they can expect this to still be a workable option, presuming they will swallow the three -4 points that are routinely required. Conventional commercial rehabilitation bank loans also have their share of arguments. From a standard banks point of view rehabilitation loans are basically the same as construction loans.
Banks need the same kind of paperwork on commercial rehab financing ( plans, allows, lien wavers, etc ) as on ground up construction. The key advantage of course is the charges and rates on are better compared against commercial personal money. commercial construction borrowers "pay " for these loans with their time and intense paperwork / reporting needs - brain damage.
Now , borrowers that need to go the standard bank route for their rehabilitation financing should think SBA ( presuming the borrower will occupy their business out of the topic property ). Most banks are just not going typical and are looking for the guarantee from the SBA to lessen the prevailing level of risk in the finance markets as well as the estate markets. There are exceptions to this of course for powerful borrowers but for the average business the SBA will most likely be the most practical option ( and it could be a great option as well ).
