As the economic recovery marches on, many small commercial real estate owners in the Chicago market are beginning to see a light at the end of the tunnel. National, regional and local tenants are increasingly filling vacancies in retail centers, office buildings and industrial parks that suffered during the Great Recession. Many municipalities are now eager to partner with local owners, recognizing the untapped potential in these developments to cater to area demands, create jobs and generate revenue.
Yet these property owners, who play an essential role in bringing jobs and economic activity to the communities in which they are located, often still find it a challenge to locate competitive financing to improve or redevelop their properties. Working with national lenders, they are faced with high closing costs, excessive legal fees and a lagging response time, and even then, they are often only able to obtain loans with recourse.
While access to non- recourse small commercial lending for locally owned projects is improving, it remains difficult for these types of owners to obtain financing terms on par with those offered to competing institutional-quality investors. Enter a new player into the financing market: alternative lenders who combine innovative lending strategies, local expertise and a greater appetite for risk to fill this void for small commercial borrowers, particularly in the $500,000 to $7 million range, a niche many larger borrowers overlook. These lenders are meeting a market demand for small-balance, non-recourse lending programs offering commercial debt consistent with the advantages of national commercial lending platforms, while streamlining the closing process and minimizing fees.
These types of alternative lending programs trade a national focus for local expertise. For example, Inland Commercial Mortgage concentrates its Midwest-based small-balance, non-recourse lending on stabilized projects within a few hundred miles of the Chicago area.
Local lenders play a key role in any area’s economic vitality, as they understand the dynamics and importance of commercial real estate driven by a “boots on the ground” perspective. Their extensive industry expertise allows them to obtain the best financing options. This tightened focus also grants them the capability to streamline the lending process, provide more timely responses to inquiries, speed along the due diligence process and allow borrowers to close under tight deadlines.
While these advantages are traditionally the hallmark of working with a local lender, it is only recently that creative lenders have been able combine this local expertise with many of the characteristics of national lending programs that generally target larger borrowers.
Inland Commercial Mortgage Group is based in Oak Brook, Ill.