Today, it’s not hard to find a good deal in commercial real estate; the hard part is getting the deal financed. And securing a commercial mortgage is even more difficult for newer or younger investors.

Traditional funding sources such as banks, Wall Street brokers and Hartford insurance companies have largely taken themselves out of the lending picture. In simple terms; banks just are not lending they way they should be. And any loans they are making are being underwritten much more conservatively. Loan-to-value ratios are much higher and lending parameters are much tighter.

Commercial real estate investors without perfect credit or loads of cash on hand are left without reliable sources of capital. Thousands of good borrowers with excellent loan proposals have been rejected by their regular lenders and are desperately seeking funding.

For a growing number of these frustrated borrowers the answer is private commercial mortgage lenders, often called “hard money” lenders. Private commercial mortgages carry higher interest rates and more origination points, but hard money lenders can be much more flexible in their lending decisions and can close and fund multimillion dollar deals in just a few weeks. Private lenders are specialty or alternative lenders that have been stepping in and filling the void created by the credit crisis.

Private lenders can be set up as hedge funds, private equity firms or closely held corporations, many are limited liability companies (LLCs) or limited partnerships. (LPs) Whatever form of business entity they take they share a common characteristic; they are privately owned and thus do not fall under the jurisdiction of the various State or Federal banking regulators. Private lenders are free to be flexible with their lending standards and are able to make quick decisions. Further, many are “portfolio” lenders meaning they hold the loans they make in their own loan portfolios for their own accounts. This unique feature of hard money lenders means that they are not dependant on the secondary mortgage bond market for liquidity. Private lenders remain largely unaffected by the credit squeeze.

The private lending sector is thriving today, while institutional lenders are just hoping to survive. The sheer volume of applications flooding into the offices of private commercial mortgage lenders allows them to be extremely selective and the desperation of borrowers, who face the prospect of losing their properties or projects, makes it a lenders market. Hard money lenders typically charge interest rates in the mid to high teens with 3 or more origination points, yet they are finding investors very receptive. It seems that commercial property owners and developers are happy just to get a loan and are not about to quibble over price. And as the credit market continues to stagnate the growth in private lending is projected to continue to grow.

Not long ago private lenders had a poor reputation as shady operators. They were called “hard money” lenders because the loans they made were against real estate, a “hard asset”. Today private lending is a thriving and very well respected business. Without oversight or interference form government regulators, private lenders are fulfilling an important role. Without the lending being done by private sources the liquidity crisis and our economic problems would almost certainly be much worse.

Until things significantly improve in the institutional credit markets, good borrowers with good loans will continue to turn to private funding sources, and the private commercial mortgage lending industry will continue to thrive

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Most of us have done it at one time or another: lent money to a friend or family member. The loan is usually done in order to help a loved one meet a goal or to take care of a pressing need. We choose money lending because we want to help. Unfortunately, all too often extending a personal loan can lead to a negative situation. Here are a few points to consider when you are faced with the possibility of floating a personal loan to someone you care about.

The thing about money lending is that the recipient obviously does not have the resources at hand to effectively take care of the matter at hand. That is why you have been approached about the personal loan. It is important that you have an informed understanding about the ability of the recipient to be able to repay the loan within a reasonable amount of time. The repayment schedule should be discussed in detail and the terms of repayment should be perfectly clear to both parties. This is done so that the transaction can be done according to perimeters that both you and the recipient feel confident can be met in a timely manner.

While you may feel that asking for some sort of documentation of the loan and the agreement to repay is not appropriate to the circumstances, it is important to remember that you are making a financial transaction. The documents are meant to protect both the lender and the receiver. They should spell out in detail the amount that is being loaned, and the terms for repayment, including any late fees that may apply. If your loved one balks at this type of arrangement, you can take this as a warning sign that you should think long and hard before going through with the loan.

It is also important to consider your own circumstances before agreeing to money lending. Can you afford to make the loan without creating any financial problems for you and your family? Your first responsibility is to your own obligations, then using any surplus you may have to help those around you. Make sure that by extending a personal loan that you will not soon find yourself in need of a loan as well.

In conclusion, ask yourself one key question: if the personal loan cannot be repaid on time, or perhaps not at all, how will that affect the relationship? Money has been the downfall of many a marriage and friendship. If the relationship you share with the recipient is something that you want to preserve, than extending a personal loan must be something you do with the conviction that if the loan cannot be repaid that you will not allow that fact to create negative feelings toward that person. Just be very sure you can really follow through with that resolve before extending the loan.

Money Lending to help out a loved one is a generous gesture. Make sure your gesture does not lead to hard feelings should an unexpected obstacle come along.

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For individuals seeking a loan for the reasons of debt consolidation, auto loan, student loan, small business loan or any other personal loan, there is a new option of funding through peer to peer lending. This option is relativity new and has become a completely separate industry. It is growing at a fast pace and for many people find it services a need not easy filled by other options.

The idea is based in person to person lending and is much like lending family members or a friend money. The bank involved acts to connect individuals who want to engage in lending or borrowing. For the borrowers, the bank helps find lenders. For the lenders, it does all the due diligence on borrowers such as a credit check and handles collection of payment. The credit checks have the purpose to reduce risk to the individual lenders and assign a max amount the borrower can get and sometimes the interest rate on a loan. 

Why do borrowers love peer to peer lending? There are several benefits. The first reason why, it is most commonly used is debt consolidation. It often gets a lower rate than other forms of consolidation and at the term of the loan the debt is completely paid off. The second reason is it is easy to seek funding. If trying to start a business, a business loan is very difficult to get from your local bank and if denied the person has to go bank to bank. With peer to peer loans, lenders often find you. There is a bit of selling your loan in the market place, but it is available for funding to thousands of potential lenders. Third, the interest rate is often lower than other forms of personal loans. Peer to peer loans reported by Lending Club, a peer to peer lending site, have an interest rate starting at 6%. This depends on your credit standing. In comparison, a credit card is usually around 10% to 20% interest and can go as high as 30%. Furthermore, the rate is set and not subject to change like a credit card. 

Why do lenders love peer to peer lending? The biggest reason is return. The rate of return, reported by Lending Club, ranges from 6% to 19%. This is extremely high rate of return in any investment. The second reason is actions taken to reduce default by peer to peer websites like Lending Club such as the initial credit screening. They list the default rate at just above 2%. This is low considering these loans are unsecure, meaning there is no collateral backing the loan. To further curb the risk, lenders are not allowed to fund just one loan with their capital. They must spread it out among several loans as to diversify their risk. 

There are several other reasons and many could be personal to the individual lender or borrower as to why people love peer to peer lending. Its history is relatively short and for the most part unknown. The trend of growth in peer to peer lending will not slow for sometime as more people discover this alternative method of investment and credit.

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