The Benefits of a Bank Loan Without the Red Tape: How a Colonial Loan Empowers Phoenix Property Developers

Amid the COVID pandemic, the economic downturn, and uncertainty about the future, it’s getting harder than ever for property developers to get bank loans when they need them – especially at fair rates. 

As a private lender, Colonial Capital has decades of experience working closely with property developers across Arizona. We help empower clients who are looking for an alternative source of capital, free of red tape and time delays at the bank. 

“How do your loans compare to a bank loan?”

This is one of the most common questions we hear from new clients looking for hard money loans in Phoenix. The answer? There is a lot in common, but there are also major points of difference. In this blog post, we’d like to help you understand how a Colonial private-capital loan compares to a standard bank loan. 

Loan processing: faster and easier 

One of the most important differences between a standard bank loan and a private-capital loan from Colonial is the loan processing experience.  At Colonial, we aim to get cash in your hands, when you need it. In practice, this means that you’ll experience a loan processing that’s two or even three times as fast as the bank. 

A commercial loan from the bank can take upwards of 60 days to get approved. Colonial loans, on the other hand, generally take between 15-20 days to get cleared. 

Here’s how our faster loan processing time helped a Colonial client close the deal on a home. 

Doug Bauguss, a property developer, spotted an incredible opportunity on a potential fix-and-flip off of 42nd Street and Thomas. There was only one problem: he needed to commit as soon as possible. There were already 5 offers on the property, and he only had 72 hours to submit an offer. On top of that, the deal needed to get closed within 30 days. 

Doug needed a capital loan to be able to buy this property. A bank loan just wouldn’t cut it in this situation: with up to 60 days of processing, there’s just wasn’t enough time for Doug to get hold of the cash he needs. This is when Colonial stepped in: we preflighted their loan in 15 days. Because we’d worked with Doug before over the past 2 years, he was confident enough in our approval process that he successfully bid on the project and won the next day. We delivered on the loan well within the 30-day window, and Doug Bauguess successfully bought, renovated, and sold the property. 

Faster processing and better opportunities for Colonial clients

As we just saw with Doug, one of the biggest benefits of Colonial Capital’s faster loan processing times is getting cash on hand when you really need it. Many potentially lucrative property projects need you to commit to a purchase as early as possible. Banks often don’t have the flexibility to make this happen – and this is where Colonial helps. 

“Personal P/L”- based hard money loans in Phoenix: Colonial invests in relationships 

Business and life both have their ups and downs. This past year has shown us that, for many Colonial Capital clients, that’s never been more true. Between the pandemic, lockdowns, and economic turmoil, many businesses are struggling hard, and banks are becoming even more cautious with dishing out loans. 

When it comes to business loans for property, many banks use a very rigid checklist to assess your current and past fiscal health. This “no exceptions” approach can make it hard for some property developers to get access to the funding they need. 

That’s not how we work at Colonial Capital. Instead of looking solely at your P/L statement, we adopt an asset-based “Personal P/L” method,  a holistic, relationship-based approach to loan approval. 

We aim to build strong, mutually beneficial relationships with property developers, which means prioritizing the overall success story, as opposed to fixed points on a ledger sheet. 

A Tucson developer successfully turned around their business 5 years ago after having had to file for bankruptcy. Despite a spotless record over the past several years, they still had trouble applying for bank loans – the bankruptcy episode was often a dealbreaker.  While it was indeed tough that they’d filed for bankruptcy, we decided instead to assess our relationship with this developer, keeping in mind the number of successful projects we had previously partnered with them on. When they came to Colonial for a loan, we looked at their asset-based personal P/L and saw an outstanding client…not a repayment risk. 

LTV and Interest: how they stack up

While our interest rates at Colonial tend to be higher than those at traditional banks, there are many other factors – like repayment terms and points – that contribute to the loan from a macro level. Compared to the bank, Colonial Capital offers significantly higher loan-to-cost (LTC) on most property loans. In many cases, we offer 75-85 percent LTC, where banks stricter lending limits.

In many cases, getting a bank loan means that you need to pay as much as 40 percent of the property value upfront, out of pocket. Sometimes, this just isn’t feasible. While Colonial Capital interest rates are higher, we empower developers by taking on a higher share of the risk. That assurance often means the difference between passing on a great opportunity and successfully purchasing and transforming that property. 

For individual renovators, private capital is often the only choice 

In last week’s blog, we talked about how Colonial Capital offered a flexible loan to developer Dario Lorenzo. Dario didn’t buy up condos at Arcadia Place in one big tranche. He needed a number of small, individual loans for each unit. 

Banks are often not able to help in these kinds of scenarios. For individual developers like Dario, this means private lenders like Colonial are often the only choice. We understand that each Colonial Capital client has a unique approach to business. Our aim isn’t to suffocate you in red tape. As with Dario, we work with each client to learn what they’re planning to do, and then offer the appropriate capital financing to support that endeavor. 

Conclusion 

At Colonial Capital, we’re committed to empowering property developers. With faster loan processing, higher loan-to-cost, and tailor-made financing solutions, we offer our clients the value of a bank loan with few of the drawbacks. Looking for a trusted private partner to empower your business? Let’s set you up with a free consultation, right here. (Link to form).

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