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Key Takeaways
Development and specialty financing encompasses a range of non-traditional lending products designed for commercial real estate projects that fall outside the scope of conventional bank financing. This includes construction loans for ground-up development, bridge financing for value-add acquisitions, hard money loans for time-sensitive deals, DSCR loans for investment properties, and private capital for complex transactions. [1]
These financing tools share several characteristics that distinguish them from conventional commercial mortgages: they are typically short-term (6-36 months), asset-based rather than borrower-based, faster to close (5-14 days vs. 60-90 days), and structured to accommodate properties in transition rather than stabilized assets. While interest rates are higher than traditional bank loans, the speed, flexibility, and creative structuring options often make specialty financing the most profitable path for experienced investors and developers.
$96.2B
commercial and multifamily construction loan commitments in 2023
Source: Federal Reserve
65-75%
typical loan-to-cost (LTC) for ground-up construction
12-36 months
typical construction loan terms based on project timeline
Source: Clear House Lending Market Data
Prime + 1-3%
common construction loan pricing structure
Construction and development financing provides capital for projects where the property does not yet exist or is being significantly transformed. These loans fund the building process and are repaid when the project is completed through either a sale or refinance into permanent financing. [3]
Ground-up construction financing for multi-family, office, retail, industrial, and mixed-use properties. Lenders provide 65-75% of total project cost (loan-to-cost) with funds released in draws as construction milestones are completed. Private construction lenders can close in 5-10 days compared to 60-90 days with traditional banks, making them the preferred choice for competitive opportunities.
Financing for land development, infrastructure improvements, and subdivision projects. This covers site work including grading, utilities, roads, and entitlement costs that prepare raw land for vertical construction. Horizontal loans typically carry higher risk in lenders' eyes, so expect lower leverage (55-65% LTC) and higher equity requirements.
Capital for repositioning, renovation, and improvement projects that enhance property value and income. Value-add strategies range from cosmetic updates to major rehabs, and lenders structure financing based on the as-stabilized value of the property after improvements are complete.
When traditional bank financing does not fit your timeline, deal structure, or borrower profile, specialty lending solutions provide speed, flexibility, and creative structuring that conventional lenders cannot match. [2]
Short-term, asset-based loans from private lenders. Hard money loans close in as little as 3-7 days and focus on the property's value rather than the borrower's credit profile. Rates range from 10-15% with 2-5 points in origination fees. Best for time-sensitive acquisitions, properties that banks will not finance, and borrowers who need speed over low rates.
A broader category of non-bank financing from high-net-worth individuals, family offices, and specialized debt funds. Private money solutions range from bridge loans and mezzanine debt to joint venture equity partnerships. These capital sources fill gaps in the financing stack that institutional lenders cannot address, particularly for complex or non-conforming deals.
Debt Service Coverage Ratio loans qualify based on the property's rental income rather than the borrower's personal income. No tax returns or W-2s required. Minimum DSCR of 1.0-1.25x, credit scores of 620-680+, and LTV up to 75-80%. DSCR loans have become the fastest-growing segment of investment property lending, with volume growing 45% from 2021 to 2023. [6]
Short-term renovation loans covering 80-90% of purchase price plus up to 100% of renovation costs, with a maximum of 65-75% of the After-Repair Value (ARV). Loans close in 5-14 days with 6-18 month terms designed for buy-renovate-sell timelines. Interest-only payments keep carrying costs low during the renovation period.
Subordinate financing that fills the gap between senior debt (typically 60-70% LTV) and the borrower's equity contribution. Mezzanine debt allows developers to achieve higher leverage (up to 85-90% of project cost) in exchange for a higher return to the mezzanine lender. This capital layer is critical for large-scale development projects where the sponsor wants to minimize their cash equity.
3-7 days
fastest closing times for hard money loans
60-70%
typical LTV for hard money loans (asset-based lending)
10-15%
interest rate range for commercial hard money loans
Source: Clear House Lending Market Data
2-5 points
typical origination fees for hard money financing
Each specialty financing product serves a different purpose. Understanding the key differences helps you select the right tool for your specific situation. [4]
| Loan Type | Rate Range | Term | Closing Speed | Best For |
|---|---|---|---|---|
| Construction | 10-15% | 12-36 months | 5-10 days | Ground-up development |
| Hard Money | 10-15% | 6-24 months | 3-7 days | Time-sensitive acquisitions |
| Fix and Flip | 10-14% | 6-18 months | 5-14 days | Renovation projects |
| DSCR | 7-10% | 30 years | 2-4 weeks | Rental property portfolios |
| Bridge | 8-13% | 12-36 months | 5-15 days | Value-add acquisitions |
| Mezzanine | 12-20% | 12-36 months | 2-4 weeks | Leveraging up large deals |
[5] Rates and terms are indicative and vary by lender, market conditions, and deal specifics.
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Selecting the right financing depends on your project type, timeline, and exit strategy. Here is a decision framework based on common investor scenarios:
If you are developing a new property, you need a construction loan with draws tied to milestones. For land development before vertical construction, start with a horizontal construction loan. Budget for 25-40% equity and expect 12-36 month terms.
House flippers and residential investors should use fix and flip loans that cover purchase plus renovation costs. For larger commercial value-add projects, a bridge loan provides similar structure at potentially lower rates.
DSCR loans are the best fit for investors scaling a rental portfolio. These long-term loans qualify on property cash flow, not personal income, making them ideal for self-employed investors or those who want to acquire multiple properties without traditional income verification. Use our DSCR Calculator to check if your property qualifies.
When a deal requires closing in days rather than weeks, hard money loans are the fastest option (3-7 days). The higher cost is justified when the alternative is losing the deal entirely. Many investors use hard money for initial acquisition and then refinance into lower-cost permanent financing once the property is stabilized.
Development financing covers construction, renovation, and value-add projects where the property is not yet stabilized. These loans are short-term (6-36 months), interest-only, and based on the property's future value rather than current income. Conventional commercial loans are long-term financing for stabilized properties with established cash flow.
Private money and hard money lenders can close in as little as 5-10 business days for straightforward deals. Bridge loans from institutional lenders typically close in 2-3 weeks. This speed advantage is the primary reason investors choose specialty financing over traditional bank loans that take 60-90 days.
Credit requirements vary by loan type. DSCR loans typically require 620-680 minimum. Hard money and private money loans prioritize the deal quality over credit scores, with some lenders accepting scores as low as 600. Construction loans from banks require 680+, while private construction lenders focus more on experience and deal fundamentals.
Yes, this is one of the primary use cases for specialty lending. Private lenders, hard money lenders, and alternative capital providers evaluate deals differently than banks. They focus on the property's value, your business plan, and your exit strategy rather than solely on credit scores and tax returns.
Capital for high-leverage, non-traditional, and construction projects
Financing for the construction of new buildings and improvements
Loans for purchasing land and developing infrastructure/lots
Asset-based, rapid funding for time-sensitive commercial deals
Flexible, custom capital from private non-institutional sources
Debt Service Coverage Ratio loans for stabilized rental property portfolios
Financing to acquire and renovate distressed commercial assets
Subordinate capital to complete the funding stack for large projects
Refinancing for jumbo home loans
Use our calculators to model financing scenarios for your next development or specialty lending project:
Commercial/Multifamily Finance Report. Mortgage Bankers Association, 2025.
https://www.mba.org/.
Industry Overview. American Association of Private Lenders, 2025.
https://www.aaplonline.com/.
Commercial Real Estate Lending Survey. Federal Reserve, 2025.
https://www.federalreserve.gov/.
U.S. Capital Markets Report. CBRE Research, 2025.
https://www.cbre.com/insights/reports/us-capital-markets-report.
Industry Standards. Commercial Real Estate Finance Council, 2025.
https://www.crefc.org/.
Multifamily Loan Products. Fannie Mae, 2025.
https://multifamily.fanniemae.com/.
Financing solutions for every stage of the commercial property lifecycle
Financing for the purchase of new commercial assets
Rate, term, and cash-out solutions for existing commercial debt
Long-term, fixed-rate financing for stabilized commercial properties
Short-term funding for quick acquisitions or property stabilization
Securitized, large balance non-recourse commercial real estate mortgages
Government-backed financing for owner-occupied commercial real estate
Commercial financing
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