Local banks are a good source for smaller loans and loans in non-prime locations. Local banks usually tend to lend in their local market to local borrowers. Local banks will expect a personal guarantee from the borrower and will usually look for a deposit relationship as well.

CMBS loans are made by Wall Street investment banking firms. These loans are pooled together and securities are issues and sold to bond buyers. The bond buyers provide liquidity and allow the issuers to make additional loans. CMBS lenders want larger loans of at least $3 million. These loans are usually written for 10 years and are non-recourse.

Life companies offer long-term insurance policies and need to match funds by issuing long-term commercial mortgage loans. Insurance companies have historically provided low rate and long-term loans on commercial real estate as part of their investment portfolios. These loans are underwritten conservatively (low loan to value ratios) and are offered on strong properties and to strong borrowers. Insurance company rates do not fluctuate with each and every move in the market as these loans are tied to the company’s internal cost of funds.

Credit unions have always lent to residential homebuyers. Now, many credit unions are starting to actively lend on commercial real estate, as well. These lenders typically like deals close to home and like to establish relationships (they like deposits). They most often compete with the local and community banks in the area. Most credit unions will expect recourse from their borrowers, and many will require that the borrower become a credit union member.

For borrowers who do not qualify for traditional financing from the other sources, there are many private, or hard money lenders, from which to choose. These loans are usually short-term and at rates considerably higher than conventional rates. These loans require less underwriting time and usually close in under 30 days. Private lenders are more concerned with property value and potential cash flow than with borrower credit issues. For borrowers with credit or income problems, or those needing a faster timeline to closing, a private lender might be a good choice.