Direct lenders provide speed and creative financing.

The rebound of the commercial real estate market has been aided by non-bank lenders in making access to capital more available to the development community.

Private lenders are the best source for securing funding for land development; projects under some form of financial or legal duress; for borrowers facing bankruptcy or imminent foreclosure; and for those who do not have the time to wait for conventional bank financing.

Bureaucracy, lack of commercial real estate expertise and unwillingness to take on certain forms of risk make traditional lenders a poor choice for developers who need quick financing decisions or bridge loans to sustain their projects. A budge loan from a private lender buys a borrower time to "right the ship" and meet stringent timetables. They always have the option to go back to the banks at a later date and refinance with a long-term loan, or position the property for sale.

Kennedy Funding, a leading direct, private lender in North America, is noted for its high speed and efficiency in bringing even the most complex loans to fruition. We have made loans to developers with only raw land who needed capital to initiate improvements in order to meet the planning and development timetables of investors and state or municipal authorities. Traditional lenders won't fund developers with flawed credit histories or less than adequate cash flow to show they can service the debt. Securitization of commercial mortgage loans has fostered a strong consolidation trend to meet the capital market's need for stability and high returns. This leaves the medium and small-sized developer left to scramble for capital in a market that's very competitive and where they're seen as being at a disadvantage or a higher than desired credit risk.

Speed, always the "hallmark" of progress and production, has become an essential factor in today's commercial real estate market. Competition, changes in interest rates, and changes in a region's economic or regulatory environment are all very time-sensitive factors that can spell success or failure for developers.

While the rates of private lenders are more expensive than traditional lenders, they also provide (in most cases) faster funding and, most importantly, professional guidance. This helps to steer developers through the maze of legal and financial processes of commercial property workouts, foreclosures, bankruptcies, and development of other types of innovative financial instruments traditional lenders would simply not consider.

Private lenders are asset-based. More often than not, they are willing to give full consideration to the assets a borrower brings to the table, overlook past credit problems and consider potential foreclosure or debtor-in-possession financing. Hard money loans charge higher interest rates. Other types of loans may appear less costly until you factor in various conditions, deep prepayment penalties, or other restrictive conditions. In addition, traditional lenders are not as service oriented in guiding the borrower through the development process, particularly if they are less experienced developers.

Unlike traditional lenders, Kennedy Funding can fund multimillion dollar loans in a matter of days and has even turned loans around within a 24-hour period. This process entails a minimum of prep work and eliminates the voluminous applications, the endless interviews with loan officers, and the time-consuming review by a loan committee even more removed from the lender-borrower relationship.

Private lenders have streamlined their processes due to the their expertise in commercial lending. They use their hands-on, experienced loan officers with the training and "authority" to take decisive action quickly.

Consolidation among developers, as well as in the financial community, has made it more difficult for the small to medium-sized developer to obtain funding. Lenders tend to favor the large corporate-level firms because of their managerial resources, economies of scale, and viability as a business enterprise. This should not preclude opportunities for small, entrepreneurial agile players to gain a significant market share regionally or nationally. But ongoing access to capital is a major factor in determining the success of smaller firms.

Every day that a developer does not move his venture forward is a loss of income. The inability to raise the capital necessary quickly can result in a lost opportunity or costly setback in a development timetable. To properly access the total cost of a loan, borrowers need to consider what the cost of not obtaining financing would be. They also need to factor in financial and legal restrictive conditions, personal liability issues, cost of equity partners, and the impact of reducing control of the property. Any time that unusual factors enter the picture, direct private lenders and non-bank entities will be the most likely to respond in a timely and effective manner. Considering all that is at stake for the borrower, any higher costs entailed in choosing a private lender are slight in comparison to the overall cost of the project and its potential rewards.