Different Types of Lenders For Different Needs

If you are in the market for a commercial loan, you will want to know about the different types of commercial mortgage lenders who are able to assist you in getting your loan. Commercial mortgage lenders range in type from large commercial banks to private individuals who invest in trust deeds. Below are a few categories of commercial lenders.

Portfolio Lenders

Portfolio lenders create commercial mortgages with the intention of holding the loans in their investment portfolios. These lenders can often offer consumers greater flexibility in the loan granting process than lenders who make mortgage loans with the intention of selling them. The two (2) most common types of portfolio lenders are commercial banks and life insurance companies.

CMBS Conduit Lenders

Commercial Mortgage Backed Securities (CMBS) are a type of security investment secured by commercial mortgages. CMBS are generated by "conduit" lenders, who originate commercial mortgages with the aim of securitizing them, arrange them in to asset pools, and sell standardized sections of these pools to investors on the open market. The interest payments on the properties securing the CMBS offerings are passed through to the investors as interest income.

Sub Prime Lenders

Subprime lenders specialize in making loans to people whose low credit scores prevent them from obtaining financing through conventional commercial mortgage lenders. Subprime lenders may be owned by banks, and the loans they generate may also sometimes be securitized. Money that is loaned does not meet "prime" standards, which puts these loans in to the riskiest category of loans typically sold in the secondary market. The collapse of the real estate market is often blamed on the huge number of subprime loans processed over the last few years.

Private Investors and Funds

These commercial lenders are also sometimes called "private" or "hard money" lenders. One of the differences between these lenders versus institutional lenders is that the loaned funds come from private individuals or a group of private individuals, instead of from a company's assets. The other difference is that private lenders are willing to receive loans with higher levels of risk and maybe even profound variability in return for a higher return (rate) on the investment. For example, loan-to-value ratios for hard money loans are often under 65% and credit scores, if required, are usually under 500.

Borrowers need to realize that there are other sources of capital besides their local bank. For example, private or sub prime lenders may be good choices for individuals who have been turned down by banks because of low credit scores or little collateral. Depending on individual loan needs, one of these sources will likely be a good fit for you.

Select Service:
Property Type:
Credit Rating:
Get Started Today! You shall want to become familiar with the types of commercial mortgages available