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.
Thursday, February 5, 2009
Thursday, December 4, 2008
Commercial Bridge Loans
We've launched a new website devoted to commercial bridge loans. A lot of content, including how to spot all of the scams out there.
Monday, November 24, 2008
Commercial Mortgages – Bad Credit
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.
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.
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
Subscribe to:
Posts (Atom)
Posts
