Today more than ever there is no lender in the market place lending 100% of the purchase price. There are rumors in the economic arena that SBA will lend 100% for professional degreed individuals, such as doctors, lawyers for their practice.
This also is not true, the way some lenders get to the 100% is that they lend them money for their furniture fixtures and equipment plus the real estate and they theoretically get 100% of the Real Estate because they borrow 90% of the entire project which in many circumstance's is greater than 100% of the property value, but they still bring to the closing table 10% of the entire project. So if they think that is 100% financing so be it, we know better.
Today I had a potential client call and tell me they were buying a coffee house/restaurant after questioning them I found out they they had zero money to put down. Why would a Realtor not pre-qualify this client and not waste everyone time.
The only way that this deal could happen is with a gift letter. A gift letter is acceptable down=payment and is used where eh actual borrower does not have the money for the down payment but a family member is willing to give them the money. Other than seller carry back for the entire purchase price EVERYONE needs money fora down payment.
For further information on SBA Eligibility Requirements continue to read this blog every night.
Thursday, May 29, 2008
Daily Observation - Banks Love Us
A quick blog this evening to let you know that you are the banks best friend.
The reason is that you can solve their problems, Most bankers immediately say to their bank clients that they can finance their deal, they do not want to tell them otherwise or else they will pull their accounts. So the client then waits for the Loan Approval that the banker told would most likely occur, but instead the people in the ivory towers, ie Underwriters/Loan Committee don't have the relationship with the client and look at the merits of the deal not the relationship that may have been built over the past ten years.
Low and behold the Ivory Tower individuals turn down the loan...
What's the banker to do, tell his client that the deal was turned down or tell the client that he will personally find a way to help him. (Hint) Here's where we come in.
We save the client banking relationship for the banker and we now use our resources to not only go to one institution but to go to a myriad of them to get the deal closed.
Read this message over again, and you will see the logic and the nuances.
To see what we can provide your client find out What Makes Us Different.
The reason is that you can solve their problems, Most bankers immediately say to their bank clients that they can finance their deal, they do not want to tell them otherwise or else they will pull their accounts. So the client then waits for the Loan Approval that the banker told would most likely occur, but instead the people in the ivory towers, ie Underwriters/Loan Committee don't have the relationship with the client and look at the merits of the deal not the relationship that may have been built over the past ten years.
Low and behold the Ivory Tower individuals turn down the loan...
What's the banker to do, tell his client that the deal was turned down or tell the client that he will personally find a way to help him. (Hint) Here's where we come in.
We save the client banking relationship for the banker and we now use our resources to not only go to one institution but to go to a myriad of them to get the deal closed.
Read this message over again, and you will see the logic and the nuances.
To see what we can provide your client find out What Makes Us Different.
Tuesday, May 27, 2008
Daily Observations - Experience
As the market for lenders get slimmer and slimmer another deterrent has been thrown in our midst. Lenders for non-SBA are now also requiring ample experience in the project they are planning to develop or purchase.
Yesterday a good cash flowing project was enough, then they added outside collateral and today we here that the experience of the management team is not enough to suffice to get a loan approved but that the owners of the project have to have the direct experience.
The lenders are using every excuse they can find to not do a deal.
Saying that there are deals that are getting done they are the cream of the crop but they are closing. So wrap your arms around a good project with the right cash flow, lots of experience and collateral and the deal will get done.
But seriously speaking not all projects are this difficult to get financed, just be aware that the more positives that the project/owners have going for them the more likelihood that you will find a lender today that wants to fund the deal.
Remember lenders only make money when they lend.
Understanding the lenders Underwriting Requirement for different investment types is crucial in today's market.
Yesterday a good cash flowing project was enough, then they added outside collateral and today we here that the experience of the management team is not enough to suffice to get a loan approved but that the owners of the project have to have the direct experience.
The lenders are using every excuse they can find to not do a deal.
Saying that there are deals that are getting done they are the cream of the crop but they are closing. So wrap your arms around a good project with the right cash flow, lots of experience and collateral and the deal will get done.
But seriously speaking not all projects are this difficult to get financed, just be aware that the more positives that the project/owners have going for them the more likelihood that you will find a lender today that wants to fund the deal.
Remember lenders only make money when they lend.
Understanding the lenders Underwriting Requirement for different investment types is crucial in today's market.
Daily Observation - Cash Flow
Cash Flow is the watch word for the lenders these days, if a project is cash flowing and the property appraises then the lenders are getting the deals closed.
However when yo are determining cash flow for your prospective client speak to the lender first, find out what expenses the subtract from the gross income to determine Debt Service Coverage Ratio . Each lender will calculate this important ratio very differently based on their experience with the locale as well as the type of property loan being requested.
TILC as well as management fees are GOING to be higher than the current sellers cash flow that your client will be basing their Return on Investment on.
Oh by the way TILC is Tenant Improvement and Leasing Cost.
However when yo are determining cash flow for your prospective client speak to the lender first, find out what expenses the subtract from the gross income to determine Debt Service Coverage Ratio . Each lender will calculate this important ratio very differently based on their experience with the locale as well as the type of property loan being requested.
TILC as well as management fees are GOING to be higher than the current sellers cash flow that your client will be basing their Return on Investment on.
Oh by the way TILC is Tenant Improvement and Leasing Cost.
Thursday, May 22, 2008
Daily Observation - Understand Your Lenders Signing Limit
I want to share an observation that came to me today. As we are presenting more and more loans to banks and underwriting one of the questions I am now asking is "What is the lenders credit approval limit,
At first you may think that this question is obvious, but upon further investigation you will hopefully see why I think this is so important.
Every underwriter has a limit of what they can approve, each time you ask for more money you have to go to the next level of approval. For example a loan of 500K may only take a local signature while a loan of 1.5K may take three signatures, one of which is out of the area, and has no idea of the local conditions,
Let me be more specific. we have one loan that is about 1.2K, I found out that if I keep the loan under 1.2K we could have approval at the local level. The more we ask for the more people that have to approve the loan. So be aware of the signers limit, and try not to exceed it, when you have the opportunity to control the loan amount,
Visit us to see What Makes Us Different
Personally, I want to have everything going in my corner when I'm fighting for my client.
At first you may think that this question is obvious, but upon further investigation you will hopefully see why I think this is so important.
Every underwriter has a limit of what they can approve, each time you ask for more money you have to go to the next level of approval. For example a loan of 500K may only take a local signature while a loan of 1.5K may take three signatures, one of which is out of the area, and has no idea of the local conditions,
Let me be more specific. we have one loan that is about 1.2K, I found out that if I keep the loan under 1.2K we could have approval at the local level. The more we ask for the more people that have to approve the loan. So be aware of the signers limit, and try not to exceed it, when you have the opportunity to control the loan amount,
Visit us to see What Makes Us Different
Personally, I want to have everything going in my corner when I'm fighting for my client.
Wednesday, May 21, 2008
Daily Observations - Credit Scores
If there is anything that can help you or hurt you its your credit score. No matter what type of loan you are going after, your credit score will definitely be a determining factor as to whether you get the loan, and or how much its going to cost you.
Its sad but true the people that have the hardest time paying their credit card bills are the borrowers that get penalized the most when it comes to cost of new credit. Common sense would say the opposite. But who says banks apply common sense.
I guess its the old adage only get a loan when you don't need the loan, so that when you need the money its there.
Back to your score. It should be over 650 for an SBA loan, and at least a 625 for a commercial loan. Now just because your credit is higher does not mean that you are guaranteed a loan In commercial unlike residential it all comes down to the cash flow of the project,
So before you spend your hard earned dollars on any investment make sure it cash flows. For a FREE No Obligation Professional Loan Analysis
Its sad but true the people that have the hardest time paying their credit card bills are the borrowers that get penalized the most when it comes to cost of new credit. Common sense would say the opposite. But who says banks apply common sense.
I guess its the old adage only get a loan when you don't need the loan, so that when you need the money its there.
Back to your score. It should be over 650 for an SBA loan, and at least a 625 for a commercial loan. Now just because your credit is higher does not mean that you are guaranteed a loan In commercial unlike residential it all comes down to the cash flow of the project,
So before you spend your hard earned dollars on any investment make sure it cash flows. For a FREE No Obligation Professional Loan Analysis
Daily Observations - The Clients Bank
To successfully close transactions you must start to look for lenders that are cash flow oriented and not collateral oriented.
More and More of the lenders as I have reported for the last couple of weeks are looking only towards collateral, and they are passing on good deals. Deals that are amply cash flowing. Lenders are running scared, and do not want to be at risk at all, but the problem as I have mentioned before is that they wont' lend at all.
The only deals that are getting done are with lenders that have previous experience with a client. So if you run into a deal first find out who they are banking with, and try to work with that institution FIRST. The client will still work and pay for your servieces if you get the loan closed. They have the relationship with the bank, but its you that packages the deal, presents the deal ad moves the deal forward,
So today think about the deals that have stalled and approach their existing lender with a new twist.
For more information on the types of loans we secure visit our website at www.loanforbiz.com.
More and More of the lenders as I have reported for the last couple of weeks are looking only towards collateral, and they are passing on good deals. Deals that are amply cash flowing. Lenders are running scared, and do not want to be at risk at all, but the problem as I have mentioned before is that they wont' lend at all.
The only deals that are getting done are with lenders that have previous experience with a client. So if you run into a deal first find out who they are banking with, and try to work with that institution FIRST. The client will still work and pay for your servieces if you get the loan closed. They have the relationship with the bank, but its you that packages the deal, presents the deal ad moves the deal forward,
So today think about the deals that have stalled and approach their existing lender with a new twist.
For more information on the types of loans we secure visit our website at www.loanforbiz.com.
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