Commercial real estate loans, and the industry in general, have gone through a tremendous amount of volatility in 2009. Huge banks have gone out of business and many more have ceased lending. Many of the banks that are still lending have created such conservative programs that very few borrower can even qualify. Many of those that can quaily won’t accept the terms as they are to harsh. Borrowers have become baffled as they take their perfectly good loan request to their previous sources only to hear “no and no and no…”
The market is bad, you know this. We estimate that literally 80% of all previous banks and lenders are either out of business or are not lending. For example the conduit market was down 98% in 2008 compared to 2007.
However, there still are commercial real estate loan options out there. None of them are perfect but a few of them are viable. For folks that operate their small business out of their commercial building, or at least 51% of it, they will have some of the reliable loans in the nation.
These programs are government guaranteed and go beyond just SBA loans. As you probably guessed, because the government has step up and further guaranteed the loans, it makes it a much safer, and attractive for the banks to take on the risk of a new loan.
Further the secondary market for these types of loans has become stronger, year to date. We are currently back up to about 60% of where we were in 2007 (Up from about 10% of where we were in the beginning of the year). This is where banks sell mortgages to one another. So the returning of the secondary market and the stability of having the government backing has kept this segment of the industry alive.
As far as terms, by far the biggest benefit of these loans is high levels of financing available. For example, most conventional lenders will now only go up to 60% loan to value, while most of the government programs will still go up to 80% – 85% on refinances or 80% – 90% on purchases. This high level of financing makes a huge difference in a market such as this where property values are declining. Many conventional deals are getting killed as the bank lowers there loan to value guidelines and at the same time, property values decline.
Another benefit is the amortization schedule offered. Government programs are typically amortized over 25 to 30 years while most banks are reducing their amortization schedule to 15 or 20 years. The issue here cash flow for the borrower. The difference in payment between a 15 year amortization schedules vs. a 25 year is often 20 – 25%. Most businesses need to keep as much cash flow in their operation as possible. Aggressively paying down their commercial real estate loan is not as important as having enough cash to pay the rest of their bills.
The current market is frustrating for all involved. However, commercial real estate loans are still closing and often loan requests that keep getting declined are often fundable, if in the hands of the right lender/bank. Keep working.
Are you frustrated with the results that your current contacts are providing? Are you concerned that they won’t be able to get your loan closed on time and at the quoted terms? If so, call Jeff Rauth, President of Jeff Rauth is President of Commercial Finance Advisors, Inc, a national commercial mortgage firm. He specializes in Commercial Real Estate Loans between $400,000 - $5,000,000, nationwide. 248 885-8797 or at SBA 7a Loans or Commercial Real Estate Loans commercial loan brokers
Wednesday, June 10, 2009
Commercial Mortgage Loans, This Year
Whether you’re in the business or are a property owner, trying to a get a commercial mortgage loan closed in this market, is akin to having a hyena as a house pet. You can do it, but it will be painful.
Here’s what is going on, from a commercial mortgage brokers perspective. Conventional lending is all but dead. If your property isn’t less than 60% loan to value, you’re going to have a difficult time getting it closed. If you have a typical investment property (non multifamily like office or a warehouse), with a non national credit tenant(s), you had better have enough outside income to carry the loan on its own or you are going to have a tough go at it (though not impossible).
Literally 80% of the banks either don’t want to lend or they can’t lend as their banking ratios have fallen below the feds standards. And or they just don’t have the cash… Many banks including some major national one have gone out of business, as its been well publicized. So you have to work with what the remaining 20%. Often times the offered terms are harsh and expensive. For those of you that are in the business you know that the conduit and or CMBS market is completely broken and nonexistent. It was literally down 98% in 2008 versus 2007. 98%... That’s according the respected Mortgage Bankers Association.
The SBA commercial loans and other more mysterious (and unpredictable government programs) have tried to step up and fill the void. In some regards its working in others it has been disappointing. For example SBA lending was down 60% as of May 2009 compared to the previous year. Ironically, this is when we all thought they would really kick in and save small business.
Commercial Mortgage Loans
Without suddenly sounding optimistic one of the best things you can do for yourself is to work with the RIGHT bank and or lender. You need to only work with the 20% that are still actively lending. Conversely and especially if you are facing a balloon the worst thing you can do is tie up you loan request with a bank that is not aggressively lending. Most of these commercial mortgage loans end up in the decline category wasting months of time and thousands of dollars, at a minimum, for the borrower.
For those that qualify for the government programs such as the SBA business loans, this can be a blessing. 85% - 90% financing is a life saver as property values continue to decline. In addition, the secondary market for these types of programs are the healthiest in the business and continue to improve. Our fearless leader, Obama, has step up the guarantee to banks as well as bought $15 billion of SBA 7a loans that had clogged the system in early 2008.
By the way, the main qualifying component to the SBA loans is that your business occupies at least 51% of the buildings space. Contrary to their reputation, the SBA program have some of the easiest qualify standards out there, compared to other commercial mortgage loans.
Do you have to get it done? Are you frustrated with the results that your current contacts are providing? Are you concerned that they won’t be able to get your loan closed on time and at the quoted terms? If so, call Jeff Rauth, President of Jeff Rauth is President of Commercial Finance Advisors, Inc, a national commercial mortgage firm. He specializes in Commercial Real Estate Loans between $400,000 - $5,000,000, nationwide. 248 885-8797 or at SBA 7a Loans or Commercial Real Estate Loans commercial loan brokers
Here’s what is going on, from a commercial mortgage brokers perspective. Conventional lending is all but dead. If your property isn’t less than 60% loan to value, you’re going to have a difficult time getting it closed. If you have a typical investment property (non multifamily like office or a warehouse), with a non national credit tenant(s), you had better have enough outside income to carry the loan on its own or you are going to have a tough go at it (though not impossible).
Literally 80% of the banks either don’t want to lend or they can’t lend as their banking ratios have fallen below the feds standards. And or they just don’t have the cash… Many banks including some major national one have gone out of business, as its been well publicized. So you have to work with what the remaining 20%. Often times the offered terms are harsh and expensive. For those of you that are in the business you know that the conduit and or CMBS market is completely broken and nonexistent. It was literally down 98% in 2008 versus 2007. 98%... That’s according the respected Mortgage Bankers Association.
The SBA commercial loans and other more mysterious (and unpredictable government programs) have tried to step up and fill the void. In some regards its working in others it has been disappointing. For example SBA lending was down 60% as of May 2009 compared to the previous year. Ironically, this is when we all thought they would really kick in and save small business.
Commercial Mortgage Loans
Without suddenly sounding optimistic one of the best things you can do for yourself is to work with the RIGHT bank and or lender. You need to only work with the 20% that are still actively lending. Conversely and especially if you are facing a balloon the worst thing you can do is tie up you loan request with a bank that is not aggressively lending. Most of these commercial mortgage loans end up in the decline category wasting months of time and thousands of dollars, at a minimum, for the borrower.
For those that qualify for the government programs such as the SBA business loans, this can be a blessing. 85% - 90% financing is a life saver as property values continue to decline. In addition, the secondary market for these types of programs are the healthiest in the business and continue to improve. Our fearless leader, Obama, has step up the guarantee to banks as well as bought $15 billion of SBA 7a loans that had clogged the system in early 2008.
By the way, the main qualifying component to the SBA loans is that your business occupies at least 51% of the buildings space. Contrary to their reputation, the SBA program have some of the easiest qualify standards out there, compared to other commercial mortgage loans.
Do you have to get it done? Are you frustrated with the results that your current contacts are providing? Are you concerned that they won’t be able to get your loan closed on time and at the quoted terms? If so, call Jeff Rauth, President of Jeff Rauth is President of Commercial Finance Advisors, Inc, a national commercial mortgage firm. He specializes in Commercial Real Estate Loans between $400,000 - $5,000,000, nationwide. 248 885-8797 or at SBA 7a Loans or Commercial Real Estate Loans commercial loan brokers
Monday, June 8, 2009
Closed SBA 7a Loan
Commercial Finance Advisors is pleased to announce the recent funding of an SBA 7a loan in Atlanta, Georgia in the suburban community of Buford. The project was a combination of a commercial refinance, construction, equipment and working capital for the borrower, who is a doctor.
“There was a couple of interesting components of the loan. One was that the borrower had already closed on the request with another bank, which after funding part of the loan backed out… It was a construction loan. This put the borrower in a terrible position and to say that he was frustrated and very concerned is an understatement. He had to still make monthly payments on the debt even though the bank did not hold up their end of the bargain.” Comments Jeff Rauth, President.
More info on SBA Business Loans:
“The first bank essentially just ran out of money. They are lucky (the first bank) we were able to get the new SBA 7a loan closed, otherwise the borrower would have had a very good lawsuit and more frustration to motivate him to pursue suing them for damages. Unfortunately we are seeing more loan requests like this cross our desk.”
SBA 7a loans are designed to help small business owners refinance or purchase new building for their business. There are a couple of very strong benefits to the program. One is that they can go up to 85% loan to value, which is a huge advantage as property values continue to decline in most markets in the nation. Another is that the underwriting standards for the SBA 7a loan can be very flexible, which allows loans that don’t fit conventional standards to still get funded.
One of the other major benefits to the program is the ability to roll in many different types of collateral, such as real estate, equipment, and good will. Borrowers are still able to get working capital and to consolidate high interest business credit cards as well.
However, not all SBA commercial loans are the same. Just like a typical commercial real estate loan, borrowers need to know who the aggressive lenders are, and how to submit loans correctly to get them done.
Commercial Finance Advisors, Inc works with borrowers nationwide, on commercial real estate loans from $400,000 - $5,000,000. Most of their clients have dealt with many local banks and are “feed up” with getting the run around and now need to get their loan closed.
“There was a couple of interesting components of the loan. One was that the borrower had already closed on the request with another bank, which after funding part of the loan backed out… It was a construction loan. This put the borrower in a terrible position and to say that he was frustrated and very concerned is an understatement. He had to still make monthly payments on the debt even though the bank did not hold up their end of the bargain.” Comments Jeff Rauth, President.
More info on SBA Business Loans:
“The first bank essentially just ran out of money. They are lucky (the first bank) we were able to get the new SBA 7a loan closed, otherwise the borrower would have had a very good lawsuit and more frustration to motivate him to pursue suing them for damages. Unfortunately we are seeing more loan requests like this cross our desk.”
SBA 7a loans are designed to help small business owners refinance or purchase new building for their business. There are a couple of very strong benefits to the program. One is that they can go up to 85% loan to value, which is a huge advantage as property values continue to decline in most markets in the nation. Another is that the underwriting standards for the SBA 7a loan can be very flexible, which allows loans that don’t fit conventional standards to still get funded.
One of the other major benefits to the program is the ability to roll in many different types of collateral, such as real estate, equipment, and good will. Borrowers are still able to get working capital and to consolidate high interest business credit cards as well.
However, not all SBA commercial loans are the same. Just like a typical commercial real estate loan, borrowers need to know who the aggressive lenders are, and how to submit loans correctly to get them done.
Commercial Finance Advisors, Inc works with borrowers nationwide, on commercial real estate loans from $400,000 - $5,000,000. Most of their clients have dealt with many local banks and are “feed up” with getting the run around and now need to get their loan closed.
Friday, March 13, 2009
Commercial Bank Loans, Why Bother?
Conventional commercial bank loans are well worth the additional scrutiny. These loans offer the lowest rates, lowest fees, longest fixed periods, and longest amortization schedules currently offered in the market today, for your typical small commercial mortgages (Under $5,000,000).
The key here for borrowers to realize is that most of the banks that use to offer conventional bank loans are now sitting on the sidelines, waiting for the economy to turn around. Still other banks don’t have any capital to lend. However, there are many banks out there that are still offering conventional bank loans. They may not be local, but they are out there.
Most small local banks that are still lending are now only offering 20 year amortization schedules, with adjustable or 5 year fixed rate programs. However, there are banks that are still funding 10 year fixed rate loans on 30 year amortization schedules. For borrowers, increasing the amortization schedule to 30 years can be a substantial increase in cash flow. Simply by spreading out the repayment period, borrowers can normally get a 20% reduction in monthly payments or more.
In addition, the benefits of having a long term fixed rate in this economy are obvious. Many borrowers (and economists) are very concerned about potential inflationary pressures that might push rates to 1980 levels; as soon as the economy stabilizes and begins to grow again. Some borrowers have literally opted to refinance out of their current lower rate loan, into a higher rate, though longer fixed rate program due to these concerns.
Another major benefit to conventional commercial bank loans and the lowered fees offered. For example, government sponsored programs, such as SBA commercial loan or B and I loans typically charge an expensive 2 -3%, which is rolled into the loan amount. Commercial bank loans in comparison are normally only 1%.
Again, the important thing for borrowers to keep in mind is that there are banks out there that are still lending commercial real estate loans. Do not let yourself get discouraged. Perhaps your local banks aren’t lending, or are only offering really conservative programs, but if you take the time to research you can find viable sources.
The key here for borrowers to realize is that most of the banks that use to offer conventional bank loans are now sitting on the sidelines, waiting for the economy to turn around. Still other banks don’t have any capital to lend. However, there are many banks out there that are still offering conventional bank loans. They may not be local, but they are out there.
Most small local banks that are still lending are now only offering 20 year amortization schedules, with adjustable or 5 year fixed rate programs. However, there are banks that are still funding 10 year fixed rate loans on 30 year amortization schedules. For borrowers, increasing the amortization schedule to 30 years can be a substantial increase in cash flow. Simply by spreading out the repayment period, borrowers can normally get a 20% reduction in monthly payments or more.
In addition, the benefits of having a long term fixed rate in this economy are obvious. Many borrowers (and economists) are very concerned about potential inflationary pressures that might push rates to 1980 levels; as soon as the economy stabilizes and begins to grow again. Some borrowers have literally opted to refinance out of their current lower rate loan, into a higher rate, though longer fixed rate program due to these concerns.
Another major benefit to conventional commercial bank loans and the lowered fees offered. For example, government sponsored programs, such as SBA commercial loan or B and I loans typically charge an expensive 2 -3%, which is rolled into the loan amount. Commercial bank loans in comparison are normally only 1%.
Again, the important thing for borrowers to keep in mind is that there are banks out there that are still lending commercial real estate loans. Do not let yourself get discouraged. Perhaps your local banks aren’t lending, or are only offering really conservative programs, but if you take the time to research you can find viable sources.
Thursday, March 5, 2009
SBA Commercial Loans – Poised For a Come Back?
Year to date we have seen 6 major national SBA lenders come back to the market. That is very encouraging news, despite all of the continued talk of the recession and how bad it might get. The fact that these leaders in the industry have the confidence to put both their necks on the line and capital, is the most important and significant statement of belief they could provide.
SBA commercial loans, including the SBA 7a and the 504 loan program have received a lot of press lately, both good and bad. On the positive side, SBA loans have been one of the most durable programs throughout the credit crisis and though down sustainably for 2008 (37%) and year to date 2009 (estimated at 50% though that is not confirmed) – SBA loans are still funding. We know this because we still are closing SBA loans.
Liken this to the CMBS market that is all but dead and was down 98% in 2008, compared to 2007... 98%... This is according to the Mortgage Bankers Association, the most reputable association in our industry.
Many people are still disappointed by the SBA performance though. After all, the SBA was created to help small business through difficult times and to get loans that they would not have otherwise been qualified for.
Borrowers need to keep in mind that the SBA does not fund loans. Rather banks/lenders fund SBA loans and they provide a guarantee to the funding bank that if the borrower defaults, the Small Business Association will pay the bank back and make them whole. However, some backs have had a difficult time getting their capital back from the SBA… Which has caused fear in upper bank management and have forced banks to further scrutinize loan requests.
Despite these concerns and the media (which continue to pound fear pound into our society), many leading experts are hopeful that we have bottomed out, and they are backing their words, with the most valuable form of confidence – their capital.
SBA commercial loans, including the SBA 7a and the 504 loan program have received a lot of press lately, both good and bad. On the positive side, SBA loans have been one of the most durable programs throughout the credit crisis and though down sustainably for 2008 (37%) and year to date 2009 (estimated at 50% though that is not confirmed) – SBA loans are still funding. We know this because we still are closing SBA loans.
Liken this to the CMBS market that is all but dead and was down 98% in 2008, compared to 2007... 98%... This is according to the Mortgage Bankers Association, the most reputable association in our industry.
Many people are still disappointed by the SBA performance though. After all, the SBA was created to help small business through difficult times and to get loans that they would not have otherwise been qualified for.
Borrowers need to keep in mind that the SBA does not fund loans. Rather banks/lenders fund SBA loans and they provide a guarantee to the funding bank that if the borrower defaults, the Small Business Association will pay the bank back and make them whole. However, some backs have had a difficult time getting their capital back from the SBA… Which has caused fear in upper bank management and have forced banks to further scrutinize loan requests.
Despite these concerns and the media (which continue to pound fear pound into our society), many leading experts are hopeful that we have bottomed out, and they are backing their words, with the most valuable form of confidence – their capital.
Tuesday, March 3, 2009
SBA Commercial Loans - Status
Via the Obama stimulus package, SBA commercial loans are in for some significant changes, so it seems. As normal however, business insiders are still waiting to see exactly how the proposed changes will actually appear on the "street".
For borrowers, the most significant change is the elimination of the of the SBA fees, which are substantial, for a period of 18 months. For example on an SBA 7a loan the fee has been set at 2.75% of the guaranteed portion of the loan, which is currently 75% of the total loan amount. So on a $1,000,000 total loan, the guaranteed portion is $750,000. The fee applies to the $750k, not the full $1 mil. The 2.75% fee in this example would equal $20,625. This fee is now going away.
The guaranteed portion of the loan has also, apparently been changed. This is in an effort to further motivate/incentives banks to begin lending again. Basically the total loan amount would be completely guaranteed, giving banks more confidence that, in case of borrower default, they would get their capital back.
As soon as we have reliable word that the changes have been made, and that banks have adopted them, we will let you know, here via this blog.
For borrowers, the most significant change is the elimination of the of the SBA fees, which are substantial, for a period of 18 months. For example on an SBA 7a loan the fee has been set at 2.75% of the guaranteed portion of the loan, which is currently 75% of the total loan amount. So on a $1,000,000 total loan, the guaranteed portion is $750,000. The fee applies to the $750k, not the full $1 mil. The 2.75% fee in this example would equal $20,625. This fee is now going away.
The guaranteed portion of the loan has also, apparently been changed. This is in an effort to further motivate/incentives banks to begin lending again. Basically the total loan amount would be completely guaranteed, giving banks more confidence that, in case of borrower default, they would get their capital back.
As soon as we have reliable word that the changes have been made, and that banks have adopted them, we will let you know, here via this blog.
Thursday, February 5, 2009
Commercial Mortgage Rates – Now
With the so called TARP money and low indexes, owners are very curious regarding where the current commercial mortgage rates are. We give specific rates below and some general thoughts surrounding them, broken down by conventional and SBA loans. We will shortly come out with another report on rates for commercial investment properties.
Commercial Mortgage Rates on Conventional
For general purpose properties like office, retail that are either partially owner occupied or rented out, with loan amounts between $500,000 - $3,000,000 we are seeing rates in the low 6%’s and for some strong borrowers in the upper 5%’s. These are based on 25 and sometimes 30 year amortization schedules. Most fixed period offered are 5 years though we are seeing a few 7 and 10 year fixed program, though rare.
Conventional loan are as you may have guessed difficult to get done now. Loan to value are generally capped at 65% and underwriting is getting really concerned with global cash flow. This is where they look very hard at all of the borrower’s income and expenses both business and personal. Though seemingly uncomplicated to calculate and determine, it can get very cumbersome quickly and is a major “lynch men” of many current loan requests as the borrowers business may cash flow yet on the personal side they are underwater.
Commercial Mortgage Rates on SBA Commercial Loans
Due to the relationship between the LIBOR rate and the PRIME rate most SBA lenders have stopped using PRIME as their index on SBA 7a loans and instead now tie their loan to the 30 day LIBOR rate plus 300 basis points. The combination of the two, is not the effective rate for the borrower but just in effect the index (the 30 Day Libor was at 1.45% on 1/1/09). The funding bank still has to add their margin on top of this combination. Most banks are at 200 to 275 basis points over. For the borrower this is the part of the rate that can be negotiated. The actual effective rates we are seeing for borrower are around 6 – 6.5% on SBA 7a’s.
Special use properties like restaurants, motel, etc are having a difficult time getting any bank to fund their loan and borrowers should expect that their rate will be at the higher end i.e. 275 basis points over.
Though the options have been reduced, commercial loans are still closing. Owner occupants should look really hard at the SBA options as they are the most viable in the market, especially on higher leveraged loans. Loan request at or below 60% loan to value, that are doable should qualify for some of the best commercial mortgage rates in the history of the business.
Lastly it has never been more important to take your loan to the right bank/lender, from the beginning. You need to know who is still closing and which source is the right fit for your situation.
Commercial Mortgage Rates on Conventional
For general purpose properties like office, retail that are either partially owner occupied or rented out, with loan amounts between $500,000 - $3,000,000 we are seeing rates in the low 6%’s and for some strong borrowers in the upper 5%’s. These are based on 25 and sometimes 30 year amortization schedules. Most fixed period offered are 5 years though we are seeing a few 7 and 10 year fixed program, though rare.
Conventional loan are as you may have guessed difficult to get done now. Loan to value are generally capped at 65% and underwriting is getting really concerned with global cash flow. This is where they look very hard at all of the borrower’s income and expenses both business and personal. Though seemingly uncomplicated to calculate and determine, it can get very cumbersome quickly and is a major “lynch men” of many current loan requests as the borrowers business may cash flow yet on the personal side they are underwater.
Commercial Mortgage Rates on SBA Commercial Loans
Due to the relationship between the LIBOR rate and the PRIME rate most SBA lenders have stopped using PRIME as their index on SBA 7a loans and instead now tie their loan to the 30 day LIBOR rate plus 300 basis points. The combination of the two, is not the effective rate for the borrower but just in effect the index (the 30 Day Libor was at 1.45% on 1/1/09). The funding bank still has to add their margin on top of this combination. Most banks are at 200 to 275 basis points over. For the borrower this is the part of the rate that can be negotiated. The actual effective rates we are seeing for borrower are around 6 – 6.5% on SBA 7a’s.
Special use properties like restaurants, motel, etc are having a difficult time getting any bank to fund their loan and borrowers should expect that their rate will be at the higher end i.e. 275 basis points over.
Though the options have been reduced, commercial loans are still closing. Owner occupants should look really hard at the SBA options as they are the most viable in the market, especially on higher leveraged loans. Loan request at or below 60% loan to value, that are doable should qualify for some of the best commercial mortgage rates in the history of the business.
Lastly it has never been more important to take your loan to the right bank/lender, from the beginning. You need to know who is still closing and which source is the right fit for your situation.
Subscribe to:
Posts (Atom)
Posts
