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.
Friday, March 13, 2009
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.
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
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