What Is Small Balance Commercial Lending?

Many commercial real estate investors are familiar with hard money or bridge loans and how to use them for projects of all sizes. Closely related to this financing is “soft money” or small balance commercial lending. Not many CRE investors are aware of this financial product, or the advantages it offers.

How Small Balance Commercial Lending Works

Small balance commercial lending works in much the same way as a hard money loan, but with a low interest rate. The other differences from a hard money loan is that small balance commercial lending has longer payment terms, which translates to more manageable payments over time, after funds are used on real estate projects.

The Advantages Of Small Balance Commercial Lending

This type of financing is very easy to obtain and funds are processed very quickly. Since small balance loans typically come from private lenders, commercial real estate investors can sidestep the prohibitive requirements and red tape involved with traditional bank loans. While small balance financing is partially dependent on credit ratings, the requirements are nowhere near as restrictive as those set by traditional lending institutions. If should also be noted that the final decision for approval is dependent more on assets and collateral over proof of income.

What Is Small Balance Lending Used For?

Small balance commercial lending is primarily used when larger funding is in the pipeline, so commercial real estate investors can use the larger financing to pay off the small balance loan. Small balance financing is typically used to cover immediate costs, such as covering closing expenses, but it can also be used for refinancing, property improvements, and even debt consolidation on existing loans. Small balance commercial lending can be secured for amounts as low as $50 thousand, and can sometimes go as high as $500 thousand and even one million dollars, depending on the nature of the qualifications, or the size and scope of the real estate project.

If you would like to learn more about small balance commercial lending, and if it could benefit your current commercial real estate projects, or if you would like to explore other CRE financing options, contact Abel Commercial Funding at 301-200-9801. Our team of professionals will work with you to assess your current financial situation, as well as your goals, in order to get you the financing you need for continued success.

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