There is a long list of institutions that provide financing for investment in real estate. These include commercial banks, investments banks, credit unions and others. Each of these institutions has its own unique process of evaluating a prospective borrower. The terms and conditions, on which they provide loans, are also different. If you want to secure financing for a real estate transaction, you must make sure which institutions are suitable for you. Since you are going to have a long relationship with them, you must choose them wisely in order to avoid any inconvenience later.

Below is a list of institution and a brief description about them. The information will be very useful for you if you are thinking about obtaining finance for real estate business.

Commercial Banks

When it comes to financing, commercial banks are the king. They are the most sought after banks since they are very organized and posses' huge amounts of money at very minimal cost. If you obtain financing from a commercial bank, you will be required to re-pay the loan in a given time with interest. If you plan to borrow a huge amount, you have no option but to contact a commercial bank because only they can provide the highest amounts of loans. Since the risk involved in commercial banking transactions is very great, consequently, they have a very strict policy of evaluating potential customers. In commercial banks the loan application goes through a number of people before getting approved so it takes a lot of time from the initial application to final disbursement. Commercial banks are suitable for you only if you want a huge amount of loan and you are not pressed for time.

You must also posses an impossible credit history and credit worth in order to qualify for a loan from commercial bank.

Fund Manager / Venture Capitalists

These are people who provide capital for a business at the initial stage or at the time of expansion. They manage funds of different people. This fund management includes investing it into profitable ventures. They make sure that the return on their investment is the highest available in the market. The interest rates charged by fund managers are higher than a commercial bank. It is highly probable that the fund manager has no working experience of real estate business because the only thing he is interested in is the rate of return on the money that he provides you. Before applying for a loan from fund manager, make sure that your projections are realistic and show considering amount of profit in future.

Bridge financing

If you want to buy a property and finance it from the sale of another property that you currently own, you can go for bridge financing. The rates for such loans are very high due to their shorter time span. The good thing about these loans is that they do not get a long time to get approved since the lender feel that his money is fairly secure in this type of transaction.



Source by Mike Lautensack