Lacking Cash? 4 Ways To Raise a Soft Deposit for Commercial Property
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.
“Buy land, they’re not making it any more”, once wrote Mark Twain, but this is easier said than done for investors struggling to fund the commercial property soft deposit they need for their purchase.
The current commercial property market presents borrowers with a frustrating paradox.
On one hand, the boom in ecommerce is fuelling the need for real-world storage and production facilities, yet on the other, the pandemic sucked the life out of the lending market.
In 2020, a peak of $16 billion in quarterly loan originations dropped by 75% overnight, a body blow the market is still struggling to recover from.
In light of this and ongoing economic volatility, real estate entrepreneurs may find their route to property acquisition blocked by a number of obstacles, including:
- An inability to raise the high minimum soft deposit required by many sellers and lenders
- Difficulty meeting other stringent lending criteria, like credit scoring
- A struggle to deal with the mountain of red tape involved with business loan applications.
Yet, while the struggle to raise a soft commercial deposit and meet other lending criteria might be disheartening, tough times often lead to opportunities.
According to JP Morgan’s Commercial Real Estate Outlook for 2023, the economic downturn means that many building owners are overleveraged, which means that property investors who can meet lending demands have a unique opportunity to acquire discounted properties to add to their portfolio.
Knowing the best ways to raise funds for ‘soft’ deposits – and indeed to cover the shortfall in loan-to-value finance in general – then looks to be a useful tactic when it comes to commercial property acquisition.
This article explores the loan options open to real estate investors in the current market and takes into account the important features of each one, including repayment terms, credit scoring and the loan application process.
Ready to find out how you can raise a soft commercial real estate deposit with no credit checks and low interest rates? Duckfund’s easy application process can get you a soft deposit loan in just 48 hours.
What is a soft deposit for a commercial property loan?
Before we look at ways to finance a soft deposit, we should first clarify what one is.
Put simply, a soft deposit is a refundable down payment that a buyer puts down to show they’re serious about purchasing a business property, such as an office building or multi-family residence that can be converted for commercial use.
Also known as a good faith deposit, the investor has the right (not the obligation) to buy the property at the agreed price once due diligence is completed. This also means they can also claim the money back should the deal fall through.
Commercial property loan deposits like this have increased in popularity in a competitive real estate market as they help sellers (and mortgage lenders) pick out serious investors from a crowd of interested parties.
What lenders look for in commercial property loan applicants
The ability to raise a commercial property loan deposit may be a useful way of demonstrating buyer willingness, but obtaining one from a third party can be trickier than for residential mortgage deposits.
Indeed, residential mortgages have actually increased sharply since the pandemic, outstripping their commercial equivalents along the way, according to US analyst firm RCA.
Tough lender conditions are contributing to this lack of growth.
First, commercial lenders will want to assess your business’s finances, as well as (or instead of) your personal funds. This may paint a misleading picture of your business’s health: you might be asset-rich but cash-poor after you’ve shelled out capital on start-up costs and are waiting for that first influx of revenue. Many lenders – particularly traditional sources – see this as a negative.
Similarly, they often use credit scoring methods that don't accurately reflect your business’s potential and this may result in poor loan-to-value (LTV) or loan terms. In the US, an SBA 7a loan typically requires a credit score of 640, for example.
Commercial lenders may also take into account the property’s value and characteristics when providing finance, sometimes insisting that it, or another asset, be used as collateral in case of repayment failure. While not a problem for many borrowers, it can be a burden that’s too big for some.
These stringent demands leave commercial borrowers looking for alternatives as they attempt to spur business growth going into 2023.
4 ways to finance a soft deposit for commercial mortgage loans
Sellers demanding a soft deposit is understandable, but it can be difficult for investors to have these funds to hand over due to poor cash flow, especially when a typical soft deposit can reach up to 10-15% of a commercial property’s value.
A tough lending market has reduced ways for business owners to raise this money, but there are still several viable financing options readily available in the US market and beyond.
1. Traditional commercial real estate loans
Commercial property bank loans have been around for a long time. Entrepreneurs in need of a financial injection have walked down this well-trodden path for centuries, giving institutions the power to set their qualification bar high.
If you have a solid credit history and a well-established, profitable business, then great: you’re probably eligible for a commercial property loan from a financial institution. This will come with a decent interest rate (typically between 4% and 7%), manageable monthly payments, and low closing costs.
If not, then you won’t like the lengthy application process, which demands extensive paperwork and several meetings with a bank employee.
Because these loans are typically for high amounts, they may not be the best option for a small business loan needed for a soft deposit, yet they’re still a possibility if your business has great creditworthiness and high profitability but restricted access to funds.
2. SBA loans
The Small Business Administration (SBA) has dealt out hundreds of billions of dollars in loans since 2020 as businesses have looked to borrow more or refinance following the pandemic.
Designed for borrowers who fall short of traditional bank credit demands, the SBA have dedicated commercial lending programs that cover the down payment, or soft deposit, needed for property. These are known as the 7a and 504 programs.
(i) SBA 7a program
The SBA 7 program allows you to borrow the down payment against another asset, like, say, another investment property. Here, you’ll need to show your business has the capacity to repay the monthly amounts from another consistent income source (even that of a spouse, in some cases).
Some 7a schemes even allow you to open up a Home Equity Line of Credit (HELOC) with the loan amount borrowed against your home. The obvious danger is that should things go awry, then your house is at risk, but it’s a useful option if you’re confident of repayment but don’t have another business asset to use as collateral.
(ii) SBA 504 loan
The 504 differs from the 7a in that it allows you to borrow the down payment without collateral as long as you can prove that it won’t harm your business.
For steady businesses looking to build financing amidst rising interest rates, the 504’s long-term fixed rate is a doubly useful option to have.
3. P2P lenders
The peer-to-peer (P2P) lending market is worth $1.1 billion in the United States thanks to its quick and easy-to-use online application process. It’s especially handy for covering smaller types of loan, like down payments or bridge loans.
P2P’s principle is simple: specialized platforms connect borrowers to individual lenders, matching customized credit scores to lending criteria. Turnaround time is often much quicker than via financial institutions, which is perfect if you need to provide a soft deposit at short notice.
While P2P is very accessible, you may find that some deals have high interest rates, especially if your credit score isn’t up to scratch with some of the more demanding platforms.
The P2P industry is also less regulated than the banking sector, so it’s important to use a trustworthy platform with a good reputation.
4. New digital finance solutions
The conflicting forces of the current economic crisis and an expanding commercial real estate market has created something of a void.
Businesses want to invest in commercial property but find their hands are tied from a lack of viable credit lines. As seen above, tough due diligence, high interest rates, and collateral demands are limiting the growth of businesses with reams of potential.
New digital solutions are stepping into this breach, breaking down the walls that are isolating would-be investors by offering low-interest, low-commission business financing.
Here’s an example of how new solutions help borrowers raise soft deposits for commercial properties.
- You fill out the online application form and agreement, and receive an approval within 24 hours.
- Should you decide to go ahead with the deal, you pay an upfront fee and agree to a temporary membership stake with the lender
- The lender signs a purchase and sales agreement for the property, and then puts the deposit to an escrow account, where it can be used as proof of a commercial property loan deposit.
- The funds are placed on hold until you agree to buy the property:
- If you do, you send the funds from the escrow to the platform, and get control of the purchase and sales agreement
- If you don’t, you have the right to terminate the deal.
Approval rates are high because rather than subjecting you to fussy credit checks and paperwork, the process asks for a temporary, removable commitment in the lender until the purchase is complete. AI-powered algorithms speed up the loan process, meaning you get access to finance within 48 hours, once approved.
You also get the flexibility to opt out of the finance should you have a change of heart.
These new digital methods are on the rise, as the lending gap in commercial property investment forces digital lenders to get creative.
With the demand for real estate finance set to intensify, they may just shape the business lending industry for decades to come.
Looking to buy that commercial property but can’t raise a soft deposit? Sign up to Duckfund to see how you can get approved for low-interest, low-commission finance within 24 hours.
CRE Classified: 7 Most Investable CRE Asset Classes Ranked By Performance in 2024
Want to see great returns on your commercial investments? Maximize your portfolio with 2024’s top 8 CRE asset classes.
Multifamily Market Trends 2024-2025: A Snapshot of Key Metrics
Look ahead to the multifamily market in 2025 with Duckfund’s in-depth analysis of current market conditions.
Hottest CRE Markets Forecasted: 7 US Cities to Watch in 2025
The difference between cities like Newark and Nashville is their CRE markets and whether you should invest in them or not.
Multi-Family Commercial Real Estate: Everything You Need to Know
All successful multifamily deals come from deep industry knowledge: this is the place to start.
The Truth Behind 7 Commercial Real Estate Myths
Dealing with facts rather than falsehoods is essential for any commercial property purchase.
How to Get Into Commercial Real Estate Development: 7 Tips to Turn Pro
For all developers and investors who want to make serious money, here’s how to get into commercial real estate successfully.
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.
How to Find Vacant Properties and Outsmart the Competition
Here’s how to find vacant properties before they go to market and the bidding wars start.
Single Tenant vs Multi Tenant: Pros and Cons for Commercial Real Estate
Whether you should buy single-tenant or multi-tenant commercial properties depends on your risk tolerance and investment strategy.
How Big Data in Commercial Real Estate Is Changing The Way Developers Profit
All big property companies are going digital. The key is knowing how they’re doing it.
Commercial Property Development Finance: 6 Ways To Secure The Right Capital
These financing options will help you carry out the commercial venture you’ve always dreamed of.
ESG, PropTech…And Bamboo. What’s Driving Commercial Real Estate Sustainability Right Now?
Knowing the latest green trends will help you make your next project a more successful one.
Top Commercial Property Operating Expenses and How to Reduce Them
With decelerating rents across multiple CRE sectors, reducing operating expenses is the most appropriate way to increase net operating income and cap rate.
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.
Upzoning, Downzoning, and Everything In Between: A CRE Investor’s Guide to Commercial Property Zones
Getting your head around zoning laws will help you make a success of your CRE investment.
How To Find The Value Of Commercial Property: A Guide For Property Developers
To be a successful developer, you must find the right place for properties you buy and charge the right price for the ones you sell.
Don't Get The Wrong Loan: Your Guide to Mastering CRE Financing
Any CRE investor worth their salt must know which financing works best for them.
Funding Mastered: How to Find the Right Commercial Building Financing for Your CRE Investment
Growing your property portfolio is possible, but you’ll need to make some key calculations.
Unlocking Opportunities: How to Raise Capital in a Tight Lending Market
Some investors see doom and gloom but there are big opportunities in the commercial real estate market for those who can focus on the positives.
How Much Does it Cost to Build a Warehouse: A CRE Investor’s Guide
Funding warehouse construction is tough, so you’ll need a detailed building plan to follow.
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.
Should You Dive into Self-Storage Financing? Unpacking the Potential for CRE Investors
Making money from self-storage is a hot topic in the CRE market, but you’ll need to know how to finance it.
3 Commercial Real Estate Challenges You Can Also Profit From
Here’s how to outsmart the biggest challenges the CRE market throws at you.
Powering the Cloud: Your Guide to Data Center Financing
So you are looking to invest in data centers, but how much will it cost?
12 Real Estate Investing Tax Strategies You Should Know
These guidelines will help you get the most out of your CRE income.
Is Earnest Money Refundable? Here’s What The Experts Say
Locking tens of thousands of dollars in escrow is not a gamble if you understand when and how earnest money is refundable.
Faster Earnest Money Deposits: The Secret Weapon in Winning CRE Deals
Earnest money deposits have become so important that CRE investors looking to build successful portfolios cannot ignore them.
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.
Get Your Properties in Order: 4 Expert CRE Investment Strategies To Help In A Tough Market
We’re going through a tough CRE market, but knowing how to invest wisely will get us through it.
7 Real Estate Law Firm Marketing Ideas Every Attorney Should Use
The property law market is crowded, but you can still stand out from the crowd
The Ultimate Guide to Good Faith Deposits in the Big Apple
From the paperwork to the payment, dive into the protocols and practices surrounding good faith deposits in NYC’s commercial real estate transactions.
Good Faith Deposits in Commercial Real Estate: A Complete Guide
Almost every CRE deal now requires a good faith deposit, so CRE investors must understand what good faith deposits are about and how to get them for every deal.
6 Mortgage Broker Marketing Ideas You May Not Have Thought Of
If you haven’t explored these mortgage broker marketing ideas, then now’s a good time to try.
How Option Fees & Earnest Money Work in Real Estate Deals
Make the right choice about financing real estate and master the differences between option fees, earnest money, and call options.
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.
Is Gator Lending Legit? Bringing Clarity to an Important Debate
Gator lending, a form of creative financing, is becoming popular. But is it legitimate or should property investors beware?
How Much Are Earnest Money Deposits in Michigan? The Definitive Guide
The right understanding of earnest money deposits in Michigan will aid prospective buyers, investors, and property flippers in confidently cinching commercial real estate deals in The Great Lakes State.
What is Gator Lending: A Simple Guide to Creative Financing in Real Estate
Gator lending is providing an alternative for real estate investors who are fed up with traditional lending becoming more inaccessible and stressful.
6 Proven Title Company Marketing Ideas to Unlock More Sales
Wondering how to get your title company’s name in front of new customers? Look no further.
Commercial Real Estate Analysis: How to Find and Select the Right Properties
Get commercial real estate analysis right, and you’ll be able to select profitable properties and avoid loss-making ones.
Commercial Real Estate Market Analysis 2024: 5 Factors Set to Move The Market
2024 will be a make-or-break year for CRE property developers. Get ahead of the market by leveraging the 5 factors laid out in this commercial real estate market analysis.
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.
Earnest Money Deposits in Tennessee: What You Need to Know Before Making an Offer
Nashville is one of the nation’s top 5 commercial real estate markets, making investments in Tennessee worthy of further research.
A Deep Dive into Earnest Money Deposits in Arizona: All You Need to Know
Understanding how earnest money deposits in Arizona work will assist you in securing a successful CRE sale in Phoenix, the US’ second hottest market to watch for 2024.
Lawsuits, Rights Losses, and Bad Publicity: Here’s What Happens if You Don’t Make An Earnest Money Payment
Not paying earnest money isn’t the end of the world, but here’s what might happen instead.
Sign Now, Pay Later: Close CRE Deals Faster with Duckfund
Thought securing a property with no money down was impossible? Think again.
Should You Buy Office Property With An LLC? All You Need to Know
CRE investors might be struggling to secure office space right now. But then they might not know about this creative soft deposit solution.
Why Releasing Earnest Money Prior to Closing Isn’t as Hard As It Looks
Putting down earnest money can be difficult and you’re not guaranteed to get it back. Knowing how to release it is vitally important.
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.
Strategies for Success: How to Flip Commercial Real Estate Contracts for Profit
Flipping commercial real estate contracts is a low-cost and low-risk investment strategy that any real estate investor can explore.
How to Safely Pay Earnest Money Online Using an LLC
Problems with earnest money payments can ruin a property deal. But they can be avoided if you use this method.
How to Flip Commercial Real Estate Like A Pro
Flipping commercial real estate has its risks, but with a good grasp of the fundamentals you can generate high returns while minimizing risk.
How Much Is Earnest Money for Commercial Property in the US: A Complete Guide
Understanding earnest money is crucial to closing commercial real estate deals in many US states.
Ignore Your Bank: Buying Commercial Property With No Money Down is Possible
Illiquidity can be a limiting factor for commercial real estate investors in today’s market. But with the right strategies, even illiquid investors can thrive.
How Much is Earnest Money in Texas: A Guide to Take Your Real Estate Game to the Next Level
How much is earnest money in Texas, and why, how, and when should it be paid? In this guide, we take you through the finer details of earnest money deposits in the USA's hottest real estate market.
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.
How to Finance a Commercial Property Without Worrying About Liquidity
Learn how to finance a commercial property via the diverse funding options available in 2023. Besides traditional banking loans, online platforms now offer great financing quickly and cost-effectively.
How Much is Commercial Land Worth: 4 Methods for CRE Valuation
Knowing what a piece of commercial land is worth will help you avoid overpaying for it. Here is your complete guide to understanding how to conduct commercial land valuation.
How Much Earnest Money Is Required in Georgia? (And Other FAQs, Explained)
Understanding how much earnest money is required in Georgia, when and how to pay, and who holds the earnest money are all vital to closing a successful property sale in one of the US’ top markets.
How Much Earnest Money Is Required in Illinois: A Comprehensive Guide
Boost your investment portfolio by investing in Chicago, Illinois, one of the US’ top gateway markets.
Finding Your Way in Florida Real Estate: A Complete Guide to How Much Earnest Money Is Required in Florida
Understanding how much earnest money is required in Florida is key to securing property in one of the top housing and commercial real estate markets in the United States.
Flip the Game: 8 Tips for Commercial Real Estate Flipping
Having capital always helps in a competitive CRE market, but sometimes getting smart leads can lead to the biggest flip gains.
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.
Earnest Money Deposits vs Down Payments: How They Differ and Why You Should Care
Earnest money deposits and down payments are both important parts of closing real estate deals, but there are significant differences that investors must be aware of.
How Does Earnest Money Work in Commercial Real Estate?
As earnest money becomes more common in commercial real estate, investors must understand what it is all about and how to secure these funds quickly when they need them.
Earnest Money in Colorado: Seal the Deal Before Anyone Else Does
Understanding the process of paying earnest money in Colorado can spell the difference between closing and losing a deal.
A Winning Investment: Learn The Difference Between Due Diligence Fees and Earnest Money
Both can make or break your property deal, so understanding these two key terms (and how they differ) is crucial.
Future-Proof Your CRE Portfolio: 10 Essential Trends Developers Should Watch (2024)
The CRE market is unpredictable but developers who stay informed will ride its waves.
Explaining Due Diligence and Earnest Money in South Carolina
Understanding the uses and distinctions between due diligence and earnest money in South Carolina is crucial to successfully navigate today's competitive market and seal valuable CRE deals.
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.
5 Commercial Real Estate Tech Trends You Can't Afford to Ignore (But Most Investors Do)
Digital transformation is changing the world. The CRE market is no different.
Ahead of the Curve: 7 Commercial Real Estate Trends Set to Shake Up 2024
The past year’s bumpy ride in CRE is far from over, but a new investment landscape emerges for the careful investor. You can thrive amid the chaos by capitalizing on 2024’s top commercial real estate trends.
Commercial Land Development: 8 Steps to Build Commercial Properties From Scratch
Commercial land development is a profitable enterprise for those who are willing to follow the process. Below is a step by step guide to doing it right.
Are Earnest Money Deposits Refundable? Everything CRE Developers Need to Know
CRE developers can use earnest money deposits to their benefit (not as a roadblock). It comes down to understanding your contract and different US state norms.
Sign Now, Pay Later with Fast Soft Deposit Financing
Discover how Duckfund can help you secure prime commercial real estate quickly, close multiple deals at once, and rapidly grow your CRE portfolio. Only pay the soft deposit when you are ready to close the deal. Apply for fast CRE funding now. We'll get back to you within 24 hours.