Archive for Commercial Loan
Dec
30
Specialized Business Loan and Commercial Mortgage Situations
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Two of the most specialized business financing and commercial real estate loan situations involve golf course financing and funeral home financing. These two complex business loan scenarios will be used to illustrate viable commercial mortgage strategies.
Funeral home loans and golf course loans involve difficulties not found in common business loan situations. A commercial loan to buy a business for a golf course or funeral home is among the most difficult business financing scenarios, and refinancing will probably be more difficult than the initial commercial mortgage purchase loan for buying the business.
Fewer Business Lenders – Funeral Home and Golf Course Financing
There has been a significant reduction in local and regional banks offering business loan programs for funeral home financing and golf course financing. This of course compounds the already difficult commercial loan environment for funeral homes and golf courses due to fewer commercial lenders which are willing to provide reasonable commercial mortgage terms.
Buy a Business – Business Opportunity Financing
Business financing to buy a business opportunity is a special business loan variation in which commercial property is not purchased. The land and buildings in such a situation are typically leased for ten years or more. Similar to a conventional mortgage to buy a golf course or funeral home, competitive business opportunity financing is not easy to find.
Business Loan Terms to Avoid – Funeral Home and Golf Course Loans
It is critical to avoid undesirable business loan terms when refinancing or buying a funeral home or golf course business. Particularly important terms involve the percentage of value for the commercial mortgage and the length of the commercial loan. Regional and local banks will frequently offer short-term business financing instead of a longer-term commercial loan.
Stated Income Commercial Mortgage Difficulties
Although a stated income commercial loan has a certain number of benefits in specific circumstances, the use of stated income business financing is not recommended for a funeral home loan or golf course loan. A major limitation of a stated income commercial mortgage is the maximum business loan possible. A further limitation is the low percentage of value for stated income commercial financing involving either golf course financing or funeral home financing.
Business Value and Commercial Real Estate Value for a Business Loan
For golf course loans and funeral home loans, the commercial real estate loan value is often less than the business value. This is particularly true with a funeral home appraisal. The problem with this disparity is that many business lenders will provide a business loan that includes only the commercial mortgage loan value, and this will produce significantly reduced business financing.
Funeral Home and Golf Course Financing – Avoid Excessive Business Loan Fees
Commercial borrowers should expect some legitimate and reasonable commercial mortgage fees during the initial commercial loan process. There are several commercial lenders that continue to take advantage of the severe lack of business loan choices for purchasing, building and refinancing a golf course or funeral home. One of the particularly unacceptable tactics is to charge exorbitant fees ($25,000 is not unusual) whether or not the business financing is successfully completed.
Commercial Lender Options for Funeral Home Loans and Golf Course Loans
As mentioned earlier, the supply of acceptable business lenders for this kind of business financing has been reduced. An agreeable commercial mortgage for a golf course loan or a funeral home loan will depend upon a wise lender choice.
A business borrower must be ready for the restricted number of qualified lenders for a golf course and funeral home commercial loan to buy a business. It is essential to find a lender with the resources to complete the complicated commercial mortgage process in a timely manner and concurrently avoid the business loan difficulties previously described.
Additional Business Finance and Commercial Mortgage Considerations
Even though the potential business loan problems described in this article are substantial, there are additional commercial mortgage difficulties which should be anticipated and avoided. Borrowers should plan to have early and extensive discussions with a business financing expert before proceeding with either purchase or refinancing efforts involving specialized real estate investment property such as golf courses or funeral homes.
Sell and Rent Back
Aug
17
Have the standards for securing a Commercial Loan changed as the home mortgage loans?
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Is it going to be more difficult to secure a 800K Commercial Building loan than say 6 months ago? I will be in the market for that kind of loan in the next week or two and haven’t a feel for the market right now.
Sell and Rent Back
Aug
07
Can I use a mortgage instead of a commercial loan?
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I know any property with 4 units or more is considered a commercial property. That being said, can I apply for a regular mortgage for a property that has 3 units or less, or do I still have to apply for a commercial loan?
Quick Property Sale
Jun
29
Commercial Mortgage Loans – What the Bankers are Looking at Today
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Even today, in these challenging economic times, there is no shortage of investors, and developers seeking commercial real estate mortgage loans. The problem is lenders are not funding deals like they were just a year or so ago.
If you want to better your chances of securing an approval and closing your deal, bring these things to the table.
Cash = Commitment
100% financing is extinct. Some borrower cash in the deal is now a strict requirement of all legitimate lenders, including private and “hard money” lenders. From a lenders perspective, the bigger the borrower down-payment the better, but, if there is enough equity in a building or project, lenders will work with as little as 10% down. They might build in a mezzanine facility or structure in some preferred equity, but, quality deals can get done with small amounts of borrower cash. That-being-said, don’t ask for 100% financing. Lenders today are looking for commitment and nothing represents commitment like cash in the deal. (Note: If a lender, or broker tells you they offer 100% financing, beware, chances are good that, in-the-end they won’t be able to fund and you’ll lose your deposit and due diligence money.)
Credibility
Lenders are looking for credibility. Now is not the time to ask a lender to fund your experiment. Don’t try to buy your first hotel during a credit crisis. Finance companies will ask about your experience in the hospitality industry and will be nervous if you lack a track record in the industry. The same goes for retail, office and industrial. Now is the time to go with what you know or partner up with an investor with experience in a particular industry you’re trying to break into. Trust me; lenders are going with what they know and they know first-timers are high risk.
Credit
You don’t have to have perfect credit to get approved for a commercial loan, but your credit report better not portray as a dead-beat either. If you are credit score challenged, be prepared to be able to mitigate that negative factor with either a co-signer, a larger down payment or cross collateralization of other real estate you own. Lenders don’t know you personally but they know precisely how many times you’ve been 15 or more days late on all of your mortgages and all of credit card payments. They look at your credit report as a report on your financial character. This may not always be fair, but to be fair to lenders, it’s really all they have to go on.
Equity
Equity is protection to a lender. If you can show equity in a building or a tract of land lenders will feel more secure and will be more likely to place the money in the escrow account and schedule a closing date. There are simple ways to increase a lenders protective equity (I said simple, not easy). The most obvious is to make a bigger down-payment; another is to ask the seller to carry-back some portion of the debt. One effective method to also consider is to increase the value of a property by taking steps to getting it fully entitled. Sometimes some simple engineering can drastically increase the value of a project. A change in zoning has been known to double real estate values and can often be accomplished simply by petitioning the local zoning authority. Inexpensive site work may also have a dramatic effect on how a bank views a property and they will definitely appreciate your spending money on the deal.
We are facing challenges today in the credit arena, but deals are still getting done, buildings are being bought and developments are still moving forward. If you want your deal to be one of the ones that gets funding take steps to show the lenders what they want to see.
MasterPlan Capital LLC – Financing for all types of Commercial Real Estate – Purchase / Refinance / Development – Simple (1 page) Application Online at: www.masterplancapital.com Quick Answers – Fast Closings – Commercial Mortgage Loans From $1MM – Equity Financing / Joint Ventures From $10MM
Glenn Fydenkevez is a former officer at one of Wall Streets biggest investment houses. His company, MasterPlan Capital, is involved, nationwide, in the financing of and investment in commercial real estate. E-mail him at glenn.fydenkevez@masterplancapital.com
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