The Benefits of Mini Perm Loans

Mini perm loans are often a necessary tool in the development of an income producing property. For those that have never dealt in the commercial property development market before, be prepared to use this type of loan frequently. Although traditional financing is great, you cannot always qualify for it when a new property is built. Therefore, it may be necessary to secure a mini perm loan for the short term. How exactly do mini perm loans work and what are their benefits?

How Mini Perm Loans Work

Building a new commercial project can be a risky proposition. When you are building retail space, apartment buildings, or other similar property, traditional lenders will not exactly beat down your door to finance the project. Most regular lenders will want to see some sort of financial history before they invest. They want to see a good income producing property before they will jump on board. When you are building a new property, it obviously will not have any income history as of yet. 

A mini perm loan can be obtained for new projects like this. It is considered a high risk investment because they are investing large sums of money on faith alone. They only have projections to look at instead of a steady history. For this reason, they require a higher than average rate of return on their investment. They are brought in to finance the project for 2-5 years depending on how long it takes to find traditional financing at a lower rate. 

Advantages of Mini Perm Loans

The biggest advantage to a mini perm loan is the fact that you can still proceed with developing commercial property even though you do not have traditional financing. Many developers are stopped in their tracks by a lack of funds from regular banks. Mini perm loans offer an alternative to banks that are rigid and strict in their investment criteria. Mini perm loans will allow you to get started on a golden opportunity before it passes you by. 

Another great thing about mini perm loans is that they are flexible in nature. When you take out a mini perm loan, you can often set up flexible repayment terms. Usually they are set up with a large balloon payment at the end of the term and small payments in the meantime. Some mini perm loans do not have any payment structure during the life of the loan. This allows new businesses to save their money for other things in the process and focus on their business. When you do not have a payment, it gives you more ability to do more things with your money instead of spending it on the loan. 

Mini perm loans also give you time to find a loan that will work for you in the long term. Mini perm loans are only for a short period of time and this gives you ample time to shop around for the best rates. When you find a good deal, you can jump on it and refinance the mini perm loan.