Direct lenders provide loans directly to borrowers. Because they make the lending

decision themselves and fund the loan with their own money, direct lenders tend to offer

the most diverse rates and terms, and are more flexible about who qualifies for a loan.

National, regional, and community banks fund a high percentage of

commercial real estate loans and are a source of financing for borrowers who can meet

their very strict guidelines. Banks are generally conservative and risk-averse, and they

decline a significant number of the commercial mortgage applications they receive.

Because they are regulated by various government agencies, banks impose restrictions

designed to minimize defaults. These include ongoing financial reporting from borrowers,

and possible covenants throughout the life of the loan which allow the banks to call the

loan before its maturity date. Additionally, most banks tend to only give loans to customers

who have deposit accounts or other banking relationships with them.

The U.S. Small Business Administration (SBA) is an independent agency

of the federal government. The SBA partners with lenders, such as banks and large credit

companies who follow SBA guidelines to secure commercial loans. To qualify for an SBA

loan, at least 51% of the subject property must be owner-occupied. These loans may also

involve equipment, business value, or construction financing, and may not be tied just to

the real estate.

Life insurance companies provide financing through commercial mortgage

bankers that source, process, and underwrite loans on behalf of the life insurance company.

Life insurance companies usually focus on larger transactions and tend to fund only the

highest quality deals.

Hard money lenders / Private lenders are lenders of last resort. Because

these lenders accommodate riskier loan requests, they have higher interest rates and lower

loan amounts relative to property value. Private loans are also short-term in nature, with

high origination and exit fees.

Wall Street conduits typically focus on high quality deals of greater than $3 million.

Rates are low, but the terms of the loan are very restrictive, often containing defeasance and