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Tuesday, July 29, 2008

Daily Observations - Miscellaneous Provisions

The new SOP has elaborated on businesses that are eligible as well as ineligible. The following businesses have been questionable under the previous SOP, and now have been clearly defined.

Bail Bond companies clearly ineligible.

Check cashing businesses clearly ineligible if they received interest on their loans

Multi-Level Marketing clearly ineligible.

Prurient Sexual Nature if 5% or greater clearly ineligible.

Mortgage servicing companies eligible if loan is sold within 14 days of closing

A new requirements that mini warehouses, office suites, shopping centers, flea markets, and mobile home parks received at least 50% revenue from services provided, rather than rental or passive income. This requirement is presumed to be applicable to extended care facilities and apartment buildings which are clearly not eligible.

Change of ownership allows financing when the business applicant is purchasing 100% of the ownership interest as either a stock or asset sale. Or one or more of the existing owners are purchasing the stock of a selling owner resulting in 100% ownership transfer. The business must be either the borrower or the co-borrower.

The SOP clarifies that the seller cannot remain an associate of the business, but may consult up to 12 months. There's also a new requirement that there has be a documented site visit of all the assets being transferred.

The lenders documentation must include for loans less than $350,000 a business valuation including the real estate. For loans greater than $350,000 or there was a close relationship a qualified independent third-party report is required.

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