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Sunday, October 5, 2008

Daily Observation - My "Guide Sheet"

Tonight I am sharing with you my guide to qualifying sheet that I use to evaluate all of our commercial and SBA deals. For more info view loanforbiz.

1. Credit – We need a credit score for SBA Loans greater than 650 for all the borrowers.
For some SBA loans I can go lower but the lender is going to look and ensure that all the other C’s are “without blemish”

2. Collateral – For SBA Loans without real estate most lenders are going to want anywhere between 50 to 95% coverage. For deals with real estate they will look to the real estate for the collateral, but if there is also a business acquisition involved they will want additional collateral to secure the “biz op”.

Remember that if any property has 25% equity the SBA REQUIRES that the property is also placed as additional collateral

3. Contribution – This is another word for down payment and the following guidelines are provided.

For Properties that are considered single purpose a minimum of 15% down
For Properties that are multi-purpose 10% will be sufficient.
For either property I still recommend a seller carry back of at least 10% of the Real estate.
For The business opportunity the SBA is requesting the seller to hold the value of the good will at a minimum

4. Capacity – Capacity is the ability to cover the debt service. Most lenders want to see in the last year at least a 1.25% DSCR, and a trend of increasing DSCR for the last three years.

5. Character is exactly that, For SBA any character issues prevent the use of a PLP lender

6. Experience – The borrower must have direct experience in the industry. For Straight commercial properties the borrower must have owned similar properties as well.

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