Every few months, a borrower will reach out to FCTD requesting an owner-user industrial building hard money loan. Usually it's for a bridge loan after the borrower’s Small Business Administration (SBA) financing falls through, or a cash-out second mortgage to go behind an existing SBA or bank loan on their building. Business owners consider hard money bridge loans as the fallback position when the bank loan can't close or will take too long, with the intention of working on long-term financing afterward.
This blog post features some of FCTD’s owner-user industrial building private money loans that we’ve funded for business owners over the past few years. Let’s take a look!
A retailer owned a large tilt-up commercial building valued at $7 million. The building owner occupied 40% of the space for their store while leasing the other 60% to multiple tenants. They came to FCTD for a $700,000 cash-out hard money second mortgage to go behind their existing CMBS loan, which was approximately 16 months from the loan's yield maintenance expiration. Cash-out proceeds from the loan went toward the down payment on another investment property.
A San Diego trucking company purchasing a new facility had their SBA financing fall through two weeks prior to closing. They pivoted to a 24-month private money bridge loan to close on the property. After closing, they continued working with their banker and obtained SBA financing seven months later.
The owners of a cold storage business in Los Angeles had an SBA loan in first position and wanted to cash out for equipment upgrades. It took only two weeks to take out a hard money second mortgage on the building, whereas a bank loan was expected to take 2-3 months. They took out the private loan, received cash-out proceeds, paid for the new equipment, and worked with their bank to consolidate the two loans into one new SBA loan.
A machine shop owner used a $200,000 bridge loan to make improvements prior to selling the business and building, then retiring.
The owner of the business and light industrial building used a 24-month private money bridge loan before selling both the business and building. The new loan paid off a maturing loan and provided two years time to sell and move out of state.
Conclusion
Owner-user industrial building hard money loans are commonplace in the world of private lending. As mortgage brokers, FCTD has worked through several of these financing situations with business owners who can't obtain bank financing. Usually, they use the hard money first or second mortgage as a bridge until qualifying for either SBA or CMBS mortgages — or as a placeholder until they sell their business and building.