Commercial Finance Advisors, a national commercial mortgage broker, releases a free report (no email address required) on both what borrowers can do to improve their credit scores immediately and what loan options are still available for them in this credit crisis. In addition, for borrowers that want more information they have a 200 page book on credit repair for free as well.
Link to report and free book: Commercial Mortgages - Bad Credit
“As commercial mortgage brokers, we are interested in closing loans not selling credit repair services. We are working hard in this market and have taken a “whatever it takes” type attitude” Says Jeff Rauth President. “And if giving away some information will help potential clients get better loans and build some loyalty to us, we’re all for it.”
Info on Commercial Mortgage Lenders
The impact of bad credit on commercial mortgage options is negative, however borrowers still can get loans closed. And the credit crisis will eventually end. If the borrower do the work now to improve their score, in 3 to 6 months who knows where we will be - It might just be a lot better. “Keep in mind we, as a nation go through recessions ever 10 to 15 years.”
Commercial Finance Advisors is a national commercial mortgage broker that focuses on commercial real estate loans amount from $500,000 - $5,000,000 for both owner occupants and investors.
Monday, November 24, 2008
Wednesday, November 19, 2008
Hard Money Commercial Loans – What Are They Thinking?
Why would any borrower accept 15% rates and 5% on the front of a hard money commercial loan? Because their other options are worse, that’s why. For example they may lose a substantial amount of equity out right or have to take on a partner that may take a higher percentage of their equity than a hard money lender would charge in fees.
Also the commercial hard money loans are easier and more reliable to attain than finding, negotiating and bringing on a partner or waiting months for a conventional loan to close (assuming the borrower qualifies). Partners also have the high potential of creating legal issues if the project does not work out as planned.
For borrowers seriously considering going with a hard money commercial lender it is wise to only use a source that has been referred to borrowers by an experienced, unbiased third party. This segment of the industry is filled with unethical people that have the bad habit of taking $5,000 good faith deposits with no intention of funding loans.
For many borrowers this $5,000 may be their last chunk of change and they can’t make the mistake of going with the wrong commercial hard money lender. Borrowers have almost no recourse either as most have to sign agreements stating that the fee is non refundable and the Letter of Intent is only a letter of “interest”. Which of course, relieves the hard money lender of funding the deal.
Commercial real estate loans
Also the commercial hard money loans are easier and more reliable to attain than finding, negotiating and bringing on a partner or waiting months for a conventional loan to close (assuming the borrower qualifies). Partners also have the high potential of creating legal issues if the project does not work out as planned.
For borrowers seriously considering going with a hard money commercial lender it is wise to only use a source that has been referred to borrowers by an experienced, unbiased third party. This segment of the industry is filled with unethical people that have the bad habit of taking $5,000 good faith deposits with no intention of funding loans.
For many borrowers this $5,000 may be their last chunk of change and they can’t make the mistake of going with the wrong commercial hard money lender. Borrowers have almost no recourse either as most have to sign agreements stating that the fee is non refundable and the Letter of Intent is only a letter of “interest”. Which of course, relieves the hard money lender of funding the deal.
Commercial real estate loans
Monday, November 17, 2008
Commercial Mortgage Refinance – Recent Closing
Commercial Finance Advisors is pleased to announce a recent commercial mortgage refinance. The property is an office condo in Atlanta, Georgia. Loan amount $1,250,000. The borrowers business occupied 100% of the office condo. Loan program was an SBA 7a loan, with a rate of 6.5%. The borrower was in a high interest rate loan, the commercial mortgage refinance saved the borrower thousands of dollars.
Link to commercial mortgage refinancing:
“We continue to grind out transaction, despite the credit crisis. The SBA 7a loan as well as other government sponsored programs are still viable. However, not all banks that offer government sponsored programs are still doing deals. You need to know which banks have the liquidity and desire to fund transactions.
http://www.cfa-commercial.com
Link to commercial mortgage refinancing:
“We continue to grind out transaction, despite the credit crisis. The SBA 7a loan as well as other government sponsored programs are still viable. However, not all banks that offer government sponsored programs are still doing deals. You need to know which banks have the liquidity and desire to fund transactions.
http://www.cfa-commercial.com
Tuesday, November 11, 2008
Commercial Hard Money
Many commercial mortgage borrowers, due to the greater realities of the market, are finding that the there only viable option is a commercial hard money loan. The terms are often surprisingly expensive for borrowers that are use to typical commercial real estate loans.
For example, market right now for commercial hard money is 12% - 16% interest only with 3% - 10% points on the front of the loan… Borrowers use to 2% over Prime as their rate, with a 1% bank fee are again, often floored by these terms.
No one ever willingly chooses to go the commercial hard money route. Instead they do so out of necessity. Borrower elect to accept the term after they have done an exhaustive search for traditional loans and have found no takers. The decision is boils down to which is more expensive, paying the 6% points or losing the business/building and or both.
Unfortunately as the credit crisis deepens and the future of the commercial secondary market remains in doubt, borrowers have to face the reality that it may be 2 to 3 years before the markets return. For some they simply cannot wait that long and have to choice their best alternative.
On a more positive side, the loan terms are interest only which often means a lower payment for the borrower, than they currently have. Also, if the loan request is a debt consolidation deal, the borrower will often save, from a cash flow perspective, thousands of dollars per month by lengthen the amortization, putting them in a stronger position to restructure and buying them time.
Again, borrowers do not normally pick hard money as their first option. But instead realize that this may be in fact their best option due to the realities of their individual situation and the greater markets.
For example, market right now for commercial hard money is 12% - 16% interest only with 3% - 10% points on the front of the loan… Borrowers use to 2% over Prime as their rate, with a 1% bank fee are again, often floored by these terms.
No one ever willingly chooses to go the commercial hard money route. Instead they do so out of necessity. Borrower elect to accept the term after they have done an exhaustive search for traditional loans and have found no takers. The decision is boils down to which is more expensive, paying the 6% points or losing the business/building and or both.
Unfortunately as the credit crisis deepens and the future of the commercial secondary market remains in doubt, borrowers have to face the reality that it may be 2 to 3 years before the markets return. For some they simply cannot wait that long and have to choice their best alternative.
On a more positive side, the loan terms are interest only which often means a lower payment for the borrower, than they currently have. Also, if the loan request is a debt consolidation deal, the borrower will often save, from a cash flow perspective, thousands of dollars per month by lengthen the amortization, putting them in a stronger position to restructure and buying them time.
Again, borrowers do not normally pick hard money as their first option. But instead realize that this may be in fact their best option due to the realities of their individual situation and the greater markets.
Monday, November 10, 2008
Restaurant Financing, Current Options
There are still viable options for restaurant financing in the market today. Borrowers however should realize and accept that the choices have become more limited, than they where just 6 months ago. For example, most conventional and or conduit type loans for restaurants are now gone.
Instead, borrowers should be focused on portfolio lenders, i.e. banks or lenders that hold the debt on their balance sheet. This is the opposite of what we have seen in the last decade as most restaurant lenders packaged and sold their loans off onto the secondary market and thus rid themselves of the loan in exchange for a split.
Portfolio lenders can be difficult to find though. And they don’t really advertise themselves as such. Borrowers should be prepared to call many banks to find sources that are set up as portfolio lenders and that are willing to consider a special purpose property like a restaurant. Many banks are shying away from this building type. We’re occasional are asked why.
The reason boils down to the difficulty in recollecting the bank’s capital in case of borrower default. When a borrower defaults on a loan, the bank has to go through the foreclosure process, than they have to sell the property on the open market to recoup their capital. Because the building itself was designed as a restaurant it cannot adequately be used for anything other than a restaurant – thus limiting their pool of potential buyers, making it harder to sell.
As far as terms, restaurant loans are almost all now quarterly adjustable. However rates are very strong due to Prime being as low as it is (currently at 4%). We are seeing most restaurant loans in the 6%’s now. Via government sponsored loan programs borrowers can still expect 85% financing on purchases and up to 85% on refinance transactions.
Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He has a STORE for commercial loan brokers. Contracts, spreadsheets, books, etc. Products starting at $4.95! Commercial Loan Rates
Instead, borrowers should be focused on portfolio lenders, i.e. banks or lenders that hold the debt on their balance sheet. This is the opposite of what we have seen in the last decade as most restaurant lenders packaged and sold their loans off onto the secondary market and thus rid themselves of the loan in exchange for a split.
Portfolio lenders can be difficult to find though. And they don’t really advertise themselves as such. Borrowers should be prepared to call many banks to find sources that are set up as portfolio lenders and that are willing to consider a special purpose property like a restaurant. Many banks are shying away from this building type. We’re occasional are asked why.
The reason boils down to the difficulty in recollecting the bank’s capital in case of borrower default. When a borrower defaults on a loan, the bank has to go through the foreclosure process, than they have to sell the property on the open market to recoup their capital. Because the building itself was designed as a restaurant it cannot adequately be used for anything other than a restaurant – thus limiting their pool of potential buyers, making it harder to sell.
As far as terms, restaurant loans are almost all now quarterly adjustable. However rates are very strong due to Prime being as low as it is (currently at 4%). We are seeing most restaurant loans in the 6%’s now. Via government sponsored loan programs borrowers can still expect 85% financing on purchases and up to 85% on refinance transactions.
Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He has a STORE for commercial loan brokers. Contracts, spreadsheets, books, etc. Products starting at $4.95! Commercial Loan Rates
Thursday, November 6, 2008
Hotel Loans – Now in the Credit Crisis
Where do you start? Hotel loans whether for purchase or refinance have taken a firm beating in this credit crisis. Basically, there are now only a few options on hotel loans. Probably 90% of all conventional hotel loan programs are gone. Deals over $3,000,000 are taking the worst of it, flagged or unflaged, conventional or nonconventional.
As many readers are aware, the issues on the commercial secondary market is the immediate cause of this mess. Very few banks are willing to portfolio hotel loans and instead are used to funding and selling the hotel debt off into the secondary market. Now since there are very few buyers, banks have to either pass on the deal or fund it and hold onto the loan in their balance sheet for the long term. Most banks would rather portfolio more general purpose properties like office or retail before they’d consider hotels. So deals that banks where willing to underwrite and fund just a few months ago, they are now backing away from in fear that there won’t be in buyers of the hotel loan.
Fixed rates on hotels are virtually gone. The vast majority of all hotel loans are now quarterly adjustable, based off of Prime. The typical margin is 2% - 2.75% over. Prime is now at 4% so most borrowers are looking at an effective rate of 6% - 6.75%. Ironically these are some of the best rates we seen in long time. But of course borrowers have to live with adjustable rates, and for some borrowers this is hard to do. Many don’t care (that much) and or recognize that this is the only option.
Debt coverage ratios have in general become more conservative (no surprise here) to a minimum 1.35. Some banks want to see ratio’s closer to a 1.4 -1.5 on conventional loans. Which basically means that the funding banks are "cherry picking". It also means that the loan to value will be very strong, most likely lower than 50% because the two ratios are tied together.
All in all, SBA loans rule the day with hotel financing. Again borrowers should be thinking about loan amount less than $3,000,000 to have more options. And on a positive note, despite all the carnage, borrowers are getting great rates, and high levels of financing through these government sponsored programs, like up to 85% on purchases and 80% on refinances. As always, the trick here is finding the commercial banks that are actually funding deals with the government programs. Just as with conventional loan most banks that used to do SBA loans are “on hold” until the market returns.
As many readers are aware, the issues on the commercial secondary market is the immediate cause of this mess. Very few banks are willing to portfolio hotel loans and instead are used to funding and selling the hotel debt off into the secondary market. Now since there are very few buyers, banks have to either pass on the deal or fund it and hold onto the loan in their balance sheet for the long term. Most banks would rather portfolio more general purpose properties like office or retail before they’d consider hotels. So deals that banks where willing to underwrite and fund just a few months ago, they are now backing away from in fear that there won’t be in buyers of the hotel loan.
Fixed rates on hotels are virtually gone. The vast majority of all hotel loans are now quarterly adjustable, based off of Prime. The typical margin is 2% - 2.75% over. Prime is now at 4% so most borrowers are looking at an effective rate of 6% - 6.75%. Ironically these are some of the best rates we seen in long time. But of course borrowers have to live with adjustable rates, and for some borrowers this is hard to do. Many don’t care (that much) and or recognize that this is the only option.
Debt coverage ratios have in general become more conservative (no surprise here) to a minimum 1.35. Some banks want to see ratio’s closer to a 1.4 -1.5 on conventional loans. Which basically means that the funding banks are "cherry picking". It also means that the loan to value will be very strong, most likely lower than 50% because the two ratios are tied together.
All in all, SBA loans rule the day with hotel financing. Again borrowers should be thinking about loan amount less than $3,000,000 to have more options. And on a positive note, despite all the carnage, borrowers are getting great rates, and high levels of financing through these government sponsored programs, like up to 85% on purchases and 80% on refinances. As always, the trick here is finding the commercial banks that are actually funding deals with the government programs. Just as with conventional loan most banks that used to do SBA loans are “on hold” until the market returns.
Wednesday, November 5, 2008
Daycare Centers Loans – From Leasing to Owning
The majority of daycare center owners, lease their facilities rather than own the underlying commercial real estate. Why? And, what are some ways that existing daycare centers can buy their existing building and enjoy the time tested benefits of owning? That’s what we discuss in this brief article.
First of all, many aspiring daycare center owners start off with the plan/desire to own their building. But often come to the conclusion that owning is just out of their reach financially, unfortunately. For example, say the daycare owner wanted to build a 8,000 square foot facility. And say the total project cost including land, construction, franchise fees, equipment and working capital totaled $1,500,000. If the daycare owner decided to own, they would be expected to shell out between 10% - 20% cash (depending on many factors such as if the daycare was a start up, risk tolerance of the bank, etc). At 15% the borrower would need to put $225,000 into the project.
If the daycare owner decide to lease the facility, on the same 8,000 square foot example above, they typically would only need to come out of pocket 10% -20% of the equipment, franchise costs, working capital and tenant improvement costs (space build out costs). These costs would normally be less than half the total project cost, or for this example approximately $600,000. The daycare owner would only need to come out of pocket $90,000 at 15% rather than $225,000 if they owned.
However, one of the easiest deals to get done, even in this credit crisis, is to buy the facility you are currently renting. Obviously you will need to come to an agreement with your landlord, but you might be surprised on how eager they are about talking to you about selling. Keep in mind, most landlords are constantly looking at new deals that requirement cash. So they may be very open minded to ripping up your lease and selling you the property.
As far as the down stroke on the purchase there is a little known guideline which can help reduce your out of pocket down payment to 5% or sometime less – It’s a form of rent concession. And NO you don’t already need it in place. From a conceptual standpoint it can be thought of as a lease to own type structure, where a portion of the monthly payment goes against the purchase price.
One of the keys here is that the value on the appraisal has to come in higher than the purchase price. For example, say you negotiate a $1,000,000 purchase price with the current owner. You have occupied the property for 2 years and paid $3,500 per month in rent or $42,000 per year. You could potentially attribute the $84,000 of this rent to go against the purchase price to cover your down payment. If the property appraised for $1,100,000 you could attribute the $84,000 of the rent you already paid. Your down stroke would be 15% of the $1,100,000 = $165,000 less the $84,000 of rent concession or total out of pocket of only $81,000. Versus a straight 15% of the $1,000,000 purchase price or $150,000 out of pocket.
If you lease your daycare center give this some serious consideration as the benefits of owning are substantial. Building long term wealth via depreciation, property appreciation and of course the chipping away of the mortgage with every payment you make, to name a few.
Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. commercial real estate loans or daycare center loans or commercial loan rates
First of all, many aspiring daycare center owners start off with the plan/desire to own their building. But often come to the conclusion that owning is just out of their reach financially, unfortunately. For example, say the daycare owner wanted to build a 8,000 square foot facility. And say the total project cost including land, construction, franchise fees, equipment and working capital totaled $1,500,000. If the daycare owner decided to own, they would be expected to shell out between 10% - 20% cash (depending on many factors such as if the daycare was a start up, risk tolerance of the bank, etc). At 15% the borrower would need to put $225,000 into the project.
If the daycare owner decide to lease the facility, on the same 8,000 square foot example above, they typically would only need to come out of pocket 10% -20% of the equipment, franchise costs, working capital and tenant improvement costs (space build out costs). These costs would normally be less than half the total project cost, or for this example approximately $600,000. The daycare owner would only need to come out of pocket $90,000 at 15% rather than $225,000 if they owned.
However, one of the easiest deals to get done, even in this credit crisis, is to buy the facility you are currently renting. Obviously you will need to come to an agreement with your landlord, but you might be surprised on how eager they are about talking to you about selling. Keep in mind, most landlords are constantly looking at new deals that requirement cash. So they may be very open minded to ripping up your lease and selling you the property.
As far as the down stroke on the purchase there is a little known guideline which can help reduce your out of pocket down payment to 5% or sometime less – It’s a form of rent concession. And NO you don’t already need it in place. From a conceptual standpoint it can be thought of as a lease to own type structure, where a portion of the monthly payment goes against the purchase price.
One of the keys here is that the value on the appraisal has to come in higher than the purchase price. For example, say you negotiate a $1,000,000 purchase price with the current owner. You have occupied the property for 2 years and paid $3,500 per month in rent or $42,000 per year. You could potentially attribute the $84,000 of this rent to go against the purchase price to cover your down payment. If the property appraised for $1,100,000 you could attribute the $84,000 of the rent you already paid. Your down stroke would be 15% of the $1,100,000 = $165,000 less the $84,000 of rent concession or total out of pocket of only $81,000. Versus a straight 15% of the $1,000,000 purchase price or $150,000 out of pocket.
If you lease your daycare center give this some serious consideration as the benefits of owning are substantial. Building long term wealth via depreciation, property appreciation and of course the chipping away of the mortgage with every payment you make, to name a few.
Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. commercial real estate loans or daycare center loans or commercial loan rates
Daycare Center Financing – Current Options
With major national daycare center lenders like UPS and CIT now out until further notice, many childcare centers owners and prospective owners are searching for financing options - and are finding few reliable programs.
One of the biggest issues here for both independent and franchised daycare centers is that most banks will no longer consider Tenant Improvement Loans. I.e. loans to build out leased space. Instead, most banks (that are still funding loans) want the collateral of the commercial real estate.
This can create a couple of different issues for the owner or franchisor. Number one, it can run right against the business model of the franchise. For example, the franchise might have a smaller location requirement and the process of finding land, going through the zoning/permitting, constructing the facility, etc don’t make sense, based on their smaller location model.
The other issue for the individual owner is that the capital injection will normally be greater, not on a percentage basis, but rather on a dollar amount. For example, on a leased facility, the operator would be expected to come in with 10% -15% cash of the tenant improvements/equipment costs. So, if these costs were $700,000, most franchisee have been expected to come in with $70,000 -$105,000 “out of pocket”.
If on that same deal, the operator decided (by choice or forced into due to the credit crisis) to own the facility, they would need roughly $250,000 to $375,000 i.e. 10% -15% of the total project cost (In this example, say $2,500,000). This difference in dollar amount is obviously substantial and will eliminate the opportunity for many hopeful daycare center owners.
For operators that can come up with the required cash, owning the facility is often their best route, regardless of the credit crisis. For one, their monthly payment is typically lower than if they leased. This increase in cash flow is paramount for any business whether daycare or not. Also, additional benefits such as depreciation and real estate appreciation are two classic advantages of owning. And of course, every month the borrower chips away at the loan balance building long term wealth rather than simply paying rent.
All in all, there are still options out there for daycare centers financing. However many industry players will have to be open minded and flexible with adapting to the current standards if they want to get there daycare centers funded.
Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He has a STORE for commercial loan brokers. Contracts, spreadsheets, books, etc. Products starting at $4.95! Check it out commercial real estate loans or daycare center loans or commercial loan rates
One of the biggest issues here for both independent and franchised daycare centers is that most banks will no longer consider Tenant Improvement Loans. I.e. loans to build out leased space. Instead, most banks (that are still funding loans) want the collateral of the commercial real estate.
This can create a couple of different issues for the owner or franchisor. Number one, it can run right against the business model of the franchise. For example, the franchise might have a smaller location requirement and the process of finding land, going through the zoning/permitting, constructing the facility, etc don’t make sense, based on their smaller location model.
The other issue for the individual owner is that the capital injection will normally be greater, not on a percentage basis, but rather on a dollar amount. For example, on a leased facility, the operator would be expected to come in with 10% -15% cash of the tenant improvements/equipment costs. So, if these costs were $700,000, most franchisee have been expected to come in with $70,000 -$105,000 “out of pocket”.
If on that same deal, the operator decided (by choice or forced into due to the credit crisis) to own the facility, they would need roughly $250,000 to $375,000 i.e. 10% -15% of the total project cost (In this example, say $2,500,000). This difference in dollar amount is obviously substantial and will eliminate the opportunity for many hopeful daycare center owners.
For operators that can come up with the required cash, owning the facility is often their best route, regardless of the credit crisis. For one, their monthly payment is typically lower than if they leased. This increase in cash flow is paramount for any business whether daycare or not. Also, additional benefits such as depreciation and real estate appreciation are two classic advantages of owning. And of course, every month the borrower chips away at the loan balance building long term wealth rather than simply paying rent.
All in all, there are still options out there for daycare centers financing. However many industry players will have to be open minded and flexible with adapting to the current standards if they want to get there daycare centers funded.
Jeff Rauth is President of Commercial Finance Advisors, Inc out of Birmingham, Michigan. He has a STORE for commercial loan brokers. Contracts, spreadsheets, books, etc. Products starting at $4.95! Check it out commercial real estate loans or daycare center loans or commercial loan rates
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