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Tuesday, December 2, 2008

Daily Observations - Words of Wisdom

Tonight we leave SBA behind and talk in general about commercial loans. I found this piece that was sent to me about two years ago and I have updated the ratios and the numbers to meet today's exciting environment. The concepts still work, so take heed. These are Commercial Loan Words of Wisdom, which are becoming part of my next piece. "The mistakes that borrowers make" which I will be sharing in January with our clients and centers of influence.

But tonight make sure that you sign up to receive our
10 FREE Special Reports to GET Your Loan Closed!, or visit loanforbiz.com for much more on commercial loans. Now the words of wisdom:

No such thing as 100% financing

If you have scores below 600, expect much higher rates if a lender can even be found for your project.

If you want a construction loan, you will need at least 30-40% of total project cost. If you don’t have that kind of equity you’re looking at too expensive of a project. High leverage construction loans are only available if you have high net worth and are an experienced developer. PS this was changed from 20 to 25% when the article was first written.

Small loan amounts are often the toughest to work and have the most problems. Don’t waste your time on loans under $200,000

Apartment loans
normally take 45 - 60 days from time of signed LOI (letter of interest). If you get a call that requests under 45 days, it’s possible but difficult. I have seen loans close in less time, but the appraisals cost extra, and everybody has to get documents in on time. If one link in the chain breaks, 30 days will come quickly.

Lenders order the appraisal. The typical turnaround is 3-4 weeks.

Always look at purchase contracts ASAP. If they’re short, you will want to have the buyer request an extension and make sure everybody is on the same page. Deals blow up because sellers will not extend contracts, and buyers assume they will.

Commercial loans generally take 45-60 days.

When talking about LTV, just because guidelines say 75%, doesn’t mean the borrower will get 75%. Every deal is based on the cash flows (net income) of the property. I can lend up to 70% or 75% on most types of property, but many times (used to be sometimes), cash flows support much less. Before you quote LTV’s or max loan amount, show us the figures.

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