How to Finance a Coworking Space with a Private CRE Loan
There are a variety of different ways to participate in the opportunities in commercial real estate. In today’s shifting office culture, however, one of the most lucrative and exciting ways is by opening a co-working space.
Co-working combines an open-concept floor plan for freelancers and small teams with the feel of a more traditional office, creating an entirely new workplace culture that speaks to the goals and needs of modern professionals. It’s also a great business model, as the more members you can get to sign up for a monthly fee, the more money you stand to make annually as a business.
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One of the biggest hurdles that people tend to run into when opening a commercial space of any kind—including co-working facilities—is financing. While frustration and roadblocks can certainly make financing difficult, getting funding for your next project doesn’t have to be impossible. The answer can often be found in private commercial real estate loans—an option many people overlook when seeking financing.
Why Consider a Private CRE Loan?
When it comes to financing a commercial real estate project, traditional commercial banks typically come to mind. Depending upon the circumstances, seeking funding from one of these banks may be the right fit. Rates tend to be low, with terms that can stretch for 20 years.
On the other hand, loans from these banks may be slow and difficult to get and typically involve lots of red tape, rigid down payments, strict income verification, the need for an exceptional credit score and possibly a personal guarantee. Between these constraints along with prepayment fees and lengthy processes for securing the loan, it stands to reason why many people avoid bank loans for commercial real estate projects.
What is a Commercial Real Estate (CRE) Loan?
If bank loans are not an option or are considered unfavorable, private CRE loans can turn out to be an excellent choice. Since no rigid, set requirements surround most private CRE loans, the lender and borrower can come to terms that suit both their needs—typically much faster than what traditional banks can do.
You can also expect to be hit with fewer fees and spend less money on things like closing costs. Though private loans are usually short-term, the right investment property can benefit all parties involved.
How to Get a Private CRE Loan
When you’ve decided that a bank loan simply won’t work for opening your co-working space, it’s time to consider working with a “hard money lender.” This type of lender offers private CRE loans and usually cares far more about the value of the property being invested in than the borrower’s credit score. If the property has verifiable value, chances are you’ll be able to secure a loan.
There are a variety of hard money lenders to choose from, although it should be noted that not all are created equal. Be sure to read online reviews from former borrowers to get a sense of a lender’s processes—the more research you can do ahead of time, the better you’ll end up feeling about your decision. Not sure where to start? Learn more about private lender non-recourse loans from iBorrow, and get started on your path toward success in the co-working space.