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Fed Interest Rate Hikes and Commercial Real Estate Financing

Updated: Jun 13, 2023

The Fed plans to raise interest rates multiple times in 2022. How will it impact commercial real estate financing?

Over the last few months, many traditional lending institutions have raised rates for both fixed and variable rate debt and tightening underwriting guidelines for commercial lending, in an effort to hedge the recent market uncertainty.

All of this translates to higher cost of debt capital, lower leverage (loan to value) and increased difficulty and documentation to secure financing. Private (non-bank) financing is a good funding alternative for commercial real estate investors looking to acquire a new property, refinance a loan coming due or cash out on an existing property. Alternative lenders can often close and fund transactions significantly quicker than traditional banks (many times less than 30 days). Investors that can close a deal quickly have increased negotiating power in the market. Remember, alternative lender financing does not have to be your ‘forever’ lender but, if used properly, it can be a tremendous advantage for a real estate investor. An alternative lender can provide immediate access to capital, shorter time to close and fund, covenant light reporting requirements, and with the biggest advantage, it provides cash to move your project forward. I always recommend the use of a CPA or financial professional to help assess any loan, lender, or financing source to ensure it is right for you.

If you would like to understand more about alternative commercial financing, please give us a call at 833-226-4288 or fill out a contact form.


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