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Our goal is to educate you on all the exciting facets of Commercial Finance. With over 25 years of experience we have a lot to teach you over the next couple of months. If you want to join our growing company we are always looking for new team members.

Sunday, October 26, 2008

Daily Observations - Long Term Leases May Be the Answer

As more and more lenders are saying No to lending on commercial investments for various reasons, there may be a glimmer of hope if you can structure your deal accordingly.

We had one deal for a refinance and cash out for a commercial office complex and we were told that there was too much risk. The reason there was too much risk is that the property was only 85% stabilized, and leases were considered short term; two years or less.

Three months ago the lenders would have loved this deal, but today 15% unstabilized is a MAJOR issue. Also the fact that the stabilization is not three years old or greater as I have mentioned on a previous blog was a deterrent as well.

Well, we went back to the borrower and had him go to each of his tenants to increase the term of the lease from the two years that he had to a minimum of five years in most cases. The extra three years of the lease has made the lender take another serious look at the deal. Don't know if they will fund it yet, but we have moved past the immediate no to the package gathering stage.

The point is not if they fund this one, the point is for you to always be thinking out of the box to represent your client to the best of your ability.

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