“Three Categories Of Industrial Property Mortgage Financing Options”
Industrial property mortgage financing options can be broken down into three commercial lending groups.
The first group of industrial mortgage lenders are banks, credit unions, and other institutional lenders.
Banks for the most part will put their money into industrial condos or other types of industrially zoned office and work space type buildings.
Institutional lenders as a whole are much less interested in heavy industrial type properties and very little if any interest in properties that have environmental contamination issues, or are suspected of having environmental contamination issues.
The credit and cash flow for bank financing needs to be very strong as well as would be required of any “A” credit lending scenario.
And while branded lenders may seem like the most obvious solution for an industrial mortgage, in many geographies they are financing less than 1/3 of the industrial properties that utilize financial leverage.
Sub Prime Institutional Lenders
The second group of industrial property mortgage lenders out there can be described as sub prime institutional lenders.
Sub prime refers to the fact that they are going to be higher cost than bank financing and in turn will take on higher risk. Institutional refers to the fact that lenders in this category typically will have portfolios in the hundred’s of millions if not billions of dollars, so there is a formalized structure of underwriting and portfolio management.
A segment of lenders in this category will only be interested in deal that are just slightly below bank grade with cash flow already in place to support repayment and an exit strategy involving bank financing once qualifying deficiencies are strengthened.
Other segments of this market will focus on industrial development, industrial land clean up, and so on.
Most sub prime institutional lenders looking at short term lending horizons between one and five years.
Depending on the area, they can provide a significant percentage of the industrial mortgage funds outstanding in the market at any one time.
Private Industrial Mortgage Lenders
Another form of sub prime lender, is the private mortgage investor/lender.
We would refer to this as the third category for industrial property loans, providing financing in the lower third of the market with respect to both rate and mortgage size.
Private lenders, for the most part, fund deals under $2,000,000 and collectively can consider a wide range of industrial properties.
Many times bank and institutional lenders will not even consider deals under $250,000 which can mean than due to deal size, private money can be the best available option.
Private lenders also provide a lot of bridge financing for faster purchase financing closes, quicker debt consolidations, and subordinate debt financing for things like additional working capital for a business, or a construction project.
Depending, on a specific parcel of industrial property, and the borrower requirements, solutions can be available from all three categories.
And the most relevant industrial mortgage offering is not always going to be the cheapest either, depending on the full financial requirements of the property owner.
One of the best ways to assess the most relevant industrial property mortgage financing options available to you is to work with an experienced business finance specialist who has access to these different lender groups and can help you zero in on the best available options for your particular situation.