How to Get a Private Commercial Loan

Are you looking to acquire or refinance a commercial property but finding traditional bank financing too time-consuming or restrictive? In many cases—especially for smaller or non-stabilized commercial properties—a private commercial loan can be the ideal solution. In this guide, we’ll walk you through how to get a private commercial loan, what to expect from the process, and why private lending often provides greater speed and flexibility than conventional bank loans.

Bank Financing vs. Private Lending

Valuation Approaches

Banks Use the Income Approach: Traditional lenders focus on a property’s net operating income (NOI) and a capitalization rate (cap rate). The property must show stable, predictable income, often with long-term leases, to meet the bank’s stricter underwriting standards.
Private Lenders Use the Sales Comparable Approach: Private lenders look more at comparable sales and the “as-is” value of the property. They are less concerned with short-term tenant situations or inconsistent rent rolls, as long as the real estate itself has market value.

“Internally, the way that commercial properties are valued is more on a comparable sales approach.”
— Jason Balin, Hard Money Bankers

Risk Tolerance and Target Properties

Banks: Prefer larger projects with established, long-term tenants. They often avoid smaller multi-family, retail, professional office, mixed-use, industrial, and self-storage properties if the leases or income streams are inconsistent.
Private Lenders: Have a higher risk tolerance and are willing to finance smaller or less “bankable” deals. They focus on the property’s resale value rather than its current operational performance.

Loan-to-Value (LTV) and Lending Terms

Most private lenders (including Hard Money Bankers) typically lend 50% to 65% of the property’s value. Importantly:

As-Is Value: Private lenders generally base their loans on the as-is appraised or market value rather than projected future income or renovations. Tenant improvements or construction budgets are rarely factored into the initial loan calculation.
Short-Term Bridge Loans: Private commercial loans often serve as bridge loans to quickly buy or stabilize a property. Once the property performs—through increased occupancy or improved financials—you may refinance into a traditional bank loan at more favorable terms.

“Typically, private lenders… will lend 50 to 65% of the value of the building. They’re going to say, ‘What is the as-is value of this property?’ We can lend a bridge loan or a short-term loan on this…”
— Jason Balin

Due Diligence: Faster, Cheaper, and More Flexible

One of the biggest advantages of private lending is the streamlined due diligence process. Banks may require upwards of $10,000 for extensive appraisals, environmental studies, and legal fees. Private lenders, on the other hand, typically perform abbreviated checks:

Financial Documents: A profit and loss statement, balance sheet, tax returns, pro forma projections, rent roll, and copies of leases.
Valuation: An abbreviated appraisal or broker’s price opinion (BPO), focusing on comparable sales.
Environmental Review: Instead of a full Phase I (and potential Phase II) study, private lenders often use a simplified environmental report that costs around $500. This flags any major issues without unnecessary delays.
Zoning Report: Quick verification that the property’s intended use is permissible.

“We won’t go and get full-blown out phase ones or phase two Environmental Studies… we’ll get an environmental report that’s typically $500… to see if there’s any red flags.”
— Jason Balin

Overall, private lenders may only charge around $1,000 to $1,500 in total due diligence costs—significantly less than bank requirements.

Borrower Qualifications: The Four C’s

Just like any lender, private lenders evaluate the borrower’s profile. However, the criteria are more flexible
than those of a bank:

Collateral: The most critical factor is the value of the property itself.
Character: Private lenders want to ensure a borrower is trustworthy, responsive, and professional.
Capacity to Execute: Do you have the experience or team to manage the property? Can you carry the monthly payments?
Credit Score: Important, but not a deal-breaker if the collateral and business plan are strong.

Exit Strategy: Key to Getting Approved

Private commercial loans are typically short-term (6–24 months). As such, lenders will always ask about your exit strategy:

Refinancing: The most common route. Once you improve the property’s occupancy or financial performance, you can refinance into a
traditional bank loan with a lower interest rate. Keep in mind, banks will still look at your credit score and the stabilized income of the property.
Selling the Property: If you plan to flip the commercial asset or sell it after stabilization, this can be a valid exit. Demonstrating clear comps and a realistic timeline is crucial.

“A lot of loans we do are underwriting with SBA, and they’re just taking too long… They’d rather spend 13% interest to get a private loan first and not lose their big deposits.”
— Jason Balin

When to Choose Private Lending

Non-Bankable Properties: If your property has shorter-term leases or inconsistent income that won’t pass a bank’s strict underwriting.
Quick Funding Needs: When time is of the essence and waiting on bank approval means you risk losing a deal or a deposit.
Bridge Financing: When you plan to stabilize or reposition the property before pursuing traditional, longer-term financing.

Steps to Get a Private Commercial Loan

Identify a Local Private Lender: If you’re in Maryland, Washington DC, Delaware, Virginia, Pennsylvania, New Jersey, or North Carolina, Hard Money Bankers can help.
Gather Basic Property Info: Provide an as-is valuation, rent roll, lease summaries, and a profit/loss overview.
Explain Your Exit Strategy: Show how you plan to refinance or sell within the short-term loan period.
Prepare Due Diligence Fees: Expect around $1,000–$1,500 for appraisals, environmental checks, and closing costs.
Close Quickly: Private lenders can often close in weeks, not months, quickly getting you the capital you need.

Ready to Secure Your Private Commercial Loan?

At Hard Money Bankers, we specialize in short-term financing for various commercial real estate projects. Whether you’re dealing with smaller assets, non-stabilized properties, or simply need to move faster than a traditional bank allows, our flexible terms and local expertise can help you close deals in record time.

Local Market Knowledge: We operate in Maryland, Washington DC, Delaware, Virginia, Pennsylvania, New Jersey, and North Carolina.
Quick Approvals and Closings: Get funded fast, so you never miss a real estate opportunity.
Tailored Solutions: Each loan is structured to meet the unique demands of your project and exit strategy.

Contact us today to discuss how we can help you get a private commercial loan and start leveraging the power of flexible, short-term financing for your next investment.