Soft Money Commercial Loan

In the present day, millions of people all over the world have turned to loans to achieve their financial needs. Apart from helping you in hard financial situations, securing a loan may also help to change your dream into reality. Whichever the case, securing a loan might seem like a complicated process that many people may be discouraged to go for it. However, at Money Lender Loans, this is quite the opposite. We aim to provide residents of Orange County with expert lending services for a quick and efficient loan-acquiring process.

Soft Money Commercial Loans

Soft money commercial loans lie in the broader category of commercial and industrial (C&I) loans. These are loans with a below-market interest rate and are issued by commercial banks and private soft money lenders. If you own a business and want to secure a loan, a soft money commercial loan may be ideal for you. You can also acquire this loan on behalf of a business entity.

The loan can provide you with working capital. Additionally, it can provide you with capital expenditure to help you purchase machinery or more for the business. You can also purchase an investment property where you will benefit by earning rental income or resale of the property.

How Soft Money Commercial Loans Work

Soft money commercial loans are long-term loans. This means they have an extended repayment period (at least a year). A lender will provide you with capital at a fixed amount, and you have to repay the capital over a specified period together with interest. Compared to other loans, soft money commercial loans have the most extended payment period, ranging from one to twenty-five years.

The Difference Between Soft Money Commercial Loans and Hard Money Commercial Loans

One main difference between soft money commercial loans and hard money commercial loans is that the former is best suited for long-term investments. On the contrary, the latter is best for funding short-term investments.

Hard money commercial loans are issued by lending companies known as hard money lenders. The lenders structure these loans depending on the after repair value (ARV) of the property in question and focus less on the borrower’s financial strength or credit score. This means hard money loans are used for funding properties in poor condition.

On the other hand, soft money commercial loans are provided by commercial banks and private money lenders and are structured on two main things. That is the credit score of the borrower and his/her ability to make monthly payments depending on income. Unlike hard money loans, these are used to fund properties in good condition.

The Requirements for Applying for Soft Money Commercial Loans


Usually, lenders issue soft money commercial loans only to borrowers that are well qualified. This means you must have a strong credit score to be eligible for this loan. Other lenders will also want you to have stable business finances and an already established business. They would also consider the time you have been in business. For instance, if you are considering a bank as your lender, you should have a lucrative business and a credit score of over 700. However, the minimum credit score that other lenders work with is 600. Still, other lenders will issue loans to borrowers that have a slightly lower credit score and younger businesses.

Additionally, lenders will want to be sure that you will repay your soft money commercial loan in due time. Thus, they will want you to provide copies of crucial financial papers, for instance, checking account statements, bank savings, the past three years of your income tax return as well as your recent work paycheck receipts. By requesting these, the lenders want to ensure you are financially stable to make monthly payments.

Also, lenders will need you to provide a business plan if you are taking a loan to fund a startup business. They do this because they want to ensure you have a realistic plan to generate income. In case you do not have the plan, the lender may assume that the chances of defaulting are high. This may lead to a loan denial.

Generally, soft money commercial loan lenders have a low-risk profile since they only provide loans to borrowers that are more qualified. Qualified borrowers will rarely default on their loans. This makes the lenders confident that they will get back their money. Consequently, soft money lenders usually charge lower rates of interest.

Soft money commercial loans are accessible in different amounts. These amounts vary depending on the lender you go for. While most lenders like banks may not lend small amounts of soft money loans, other loaning institutions will work with small amount borrowers. At Money Lender Loans, we give as little as possible to enable you to meet your business needs. Note that banks do a similar amount of work when processing either larger or smaller loans. Thus, they would instead process larger loans since they are more profitable.

Collateral Requirements

The need to provide collateral is another aspect of why soft money commercial loans are relatively less expensive compared to other C&I loans. Most soft money loans would require that you provide collateral to secure the loan. The collateral is usually a valued asset, for example, a car, commercial real estate, savings account, or a home.

When you provide collateral, your lender accepts a lower risk by extending credit to you. If you default on your loan, your lender will seize the collateral to recover their losses. Like it is with other C&I loans, a lower risk for a lender means a lower interest rate for you.

Do not worry if you do not have security to offer. Other lenders issue soft money commercial loans without asking specific security. Instead, they will place a blanket lien on the assets of your business and ask for a personal guarantee. 

Loan Rate

Soft money commercial loans have interest rates ranging between 4% and 30%. This makes them one of the most affordable loan options compared to other commercial and industrial loans that come with rates starting from 8.5% and going as high as 80%.

Just like any other loan, soft money commercial loan affordability is based on your qualifications as the beneficiary and your lender. In most cases, lenders who charge more interest rates have fewer qualification requirements compared to those who charge lower rates.


Unlike hard money commercial loans that come with biweekly, weekly, or daily repayments, soft money commercial loan installments do not put that payment pressure on beneficiaries. With a soft money loan, you will have monthly payments spread over several years.

Again, the soft money loan repayment period varies depending on your lender. However, generally, the repayment period for this type of loan ranges from one to twenty-five years. Also, the precise repayment period is based on how you will use the loan. If you acquired the soft money loan for general business expansion or working capital, the repayment period would be the utmost of ten years. Moreover, if you secured the loan to purchase a real estate, the repayment period can be up to twenty-five years.

Another aspect that affects the repayment period is the form of the interest rate. Most soft money commercial loans have fixed rates of interest. However, other lenders may charge variable interest rates which change depending on the market. If variable interest rates change, your monthly payments will also change. However, if the interest rate is fixed, monthly payments will remain the same throughout the loan period.

Compared to hard money commercial loans, soft money loans are quite accommodating in terms of repayment. This is because, with hard money loans, you must repay the entire amount of the loan, including interest over a short-time period (between three to eighteen months). Also, the lender will deduct payments daily or weekly, which can cut into the cash flow of your business. On the other hand, soft money loan repayment periods are spread out over several years. This means the repayments are of smaller amounts, which won’t hurt your business.

Loan Process

When applying for a loan at Money Lender Loans, you have to undergo a specific process, just like it is with other lending companies. The process of acquiring a loan varies based on the loan you want. For a soft money commercial loan, the general steps include the following.

Application of the loan

When you begin the process of applying for a soft money commercial loan, usually your lender will request specific details about your debts, if any, and income. This includes your debt to income ratio where most lenders prefer that your debt payments be no more than 33% of your gross monthly income. With these details, the lender will determine how much they will lend you given the circumstances. Also, it is at this stage that the lender will evaluate your credit score. Usually, a credit score of 600 is acceptable. However, it doesn’t guarantee that you will receive the loan.

It is also at this stage that you and your lender will figure out the type of soft money commercial loan and program is best for both of you. Additionally, it is during this stage that you will complete application forms for the loan you want. Along with the application forms, you may be asked to submit a business plan and resumes, personal financial details, which includes three years of tax returns. You will also provide financial projections and results, which include balance sheets, profit & loss statements, and cash flow statements.

Loan Estimate

After submitting filled-out application forms, you will be given an estimate. The estimate contains details on the soft money loan you have applied and the loan amount you may receive. Additionally, the estimate notifies you about the loan interest rates and the amount of the monthly payments should you agree to the loan.

Also, the estimate provides crucial details concerning possible associated costs, special loan conditions, and the penalties you will be subjected to if you violate a particular term. For instance, what punishment you will face should you fail to make monthly payments.  It is important to keep in mind that receiving a loan estimate doesn’t necessarily mean denial or approval. It only provides essential details in a clearer manner.

Loan processing

After going through a loan estimate, you can then decide whether to continue with the application process. If you choose to continue, your lender will review your application. Additionally, you may be required to submit certain documents too.  After sending your application together with the necessary details and documents, an underwriter reviews it to determine whether the loan is acceptable or not given your situation. It is at this stage that you know your loan approval or denial.


Finally, in case your loan is approved, more information on the final details of your loan is provided. After receiving these details, you will have about three days of asking any questions or seeking clarification about the loan before closing. After approving everything, your lender will set an appointment so you can sign the documents of the loan.  Also, at this stage, you are given a chance to assess the loan once more. Then, you will pay closing fees associated with the soft money loan you acquired. After this, you will receive your loan.

Uses of Soft Money Commercial Loans

Soft money commercial loans are perfect for businesses, both large and small, but they may not be ideal for every situation. Even though interest rates on these loans are lower compared to other loans that do not necessarily mean they are less expensive. You will be paying the interest over a long period; thus, the interest’s total amount will generally be higher.

For example, if the interest on a loan of $250,000 is 7% and the repayment period is ten years, you will have to pay $98,325 as the total amount of interest over the loan period. Contrarily, if the interest on the same amount of loan is 40% and the repayment period is nine months, you will have to pay only $43,486 as the total amount of interest.

Generally, soft money commercial loans are ideal for significant business investments. The investments may include:

  • Making a major business expansion
  • Opening a new business location
  • Renovating the existing business location
  • Expansion of product offering
  • Purchasing significant fixed assets like real estate or commercial vehicle
  • Refinancing existing debts
  • Buying equipment
  • Hiring new employees

Advantages and Disadvantages of Soft Money Commercial Loans

When you need a loan, it is easy to be blinded by money prospects and not think about the drawbacks and benefits of getting the loan. If you are getting a loan, it is crucial to consider its long-term advantages and disadvantages. This helps you to determine whether or not it will benefit your business. Let’s look at the advantages and disadvantages of soft money commercial loans.


  • Less monthly payments- if you secure a soft money commercial loan, you can break down large expenses into affordable monthly payments.
  • Lower interest rates- In case you have the highest credit score, you can benefit from interest rates of as low as 5% upon securing a soft money commercial loan. Thus, these are among the most affordable loan options you can acquire.
  • A flexible payment schedule
  • When you obtain a soft money commercial loan, it becomes part of your credit history. Thus, it may help to rebuild your credit.
  • The risk of default is lower since soft money lenders give out loans based on the borrower’s high credit score.
  • Debt consolidation- if you acquire a soft money commercial loan to pay off or consolidate high-interest debts, you can save much money over the loan period.


  • They require a high credit score- soft money commercial loans can be difficult to secure if you have a low credit score. For you to receive this loan, you must have a high credit score of over 600 with no negative items on your credit history. While a few lenders may provide loans to borrowers with lower credit scores, interest rates may be quite high. Also, the loan terms may not be as favorable.
  • More paperwork- since soft money commercial loans often involve large amounts, lenders have to be sure that you will repay the loan. Thus, the application process involves more paperwork. You have to be ready to spend the needed time to submit all the documentation so you can qualify for the loan.
  • Long closing periods- depending on the lender you are dealing with, the closing period of a soft money commercial loan can go up to thirty days.
  • Variable rates of interest- certain soft money commercial loans have variable rates of interest. While a variable interest rate can help you to save money when market rates fall, there’s a possibility that the rates may increase, leading to higher monthly payments.

Find a Private Money Lender Near Me

Applying for a soft money commercial loan is not an easy task. When dealing with most lenders, you may be required to spend much time compiling your application and putting your paperwork in order. At Money Lender Loans, we use advanced technology when underwriting and processing loans, so your application is less extensive. If you are in Orange County and are seeking to acquire a soft money commercial loan, call us at 949-409-4372 so we can begin the process right away.

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Call 949-409-4372 24/7 if you want to secure lending, get a quote, or ask questions.

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“Money Lender Loans was there when I needed it the most. Their application process was simple, straightforward, and easy—especially for someone like me who has never had to take out a loan before! With the loan, I was able to improve my business for the better! I would recommend them to anyone.”

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