Very short and to the point this evening.
Only work on deals that you believe have an 85% chance or better to get funded. Don't be hesitant to share this with your prospective clients, they will respect you for this. We have never had to tell no to so many people and they understand it's not your fault.
But on the converse if you tell someone you have an 85% chance of getting the loan approved, then make sure that you do everything within your power and control to get that loan closed. Keep your client informed as to every step that is occurring. If you are getting denials from the lender find out why, then go back to your client and see if the reason is surmountable. If it is, go back to work, if it's not release the client "politely".
You are not doing your client any service by keeping them hanging on as you try to continue to fight the uphill battle. We have to face reality and that is right now lenders as I mentioned in my last blog have the ability to cherry pick the best and strongest loans.
Remember pre-qualify tougher than you ever did before and if they pass the PQ test don't leave any stone unturned as you look for financing for them. Apply what I coined as the self test, Would you lend them your hard earned money?, if yes go to work, if not tell them why not and allow them if able to "fix" the issues that you see.
Visit loanforbiz for more on pre-qualifying clients.
Thursday, October 30, 2008
Wednesday, October 29, 2008
Daily Observations - SBA Guarantee Fees & Points?
Prior to this debacle there was never any points associated with SBA Loans. The only fee a client would pay was the SBA Guarantee Fee. That fee was 75% of the loan amount times either 2.0, 2.5, or 3.0% of that number. Usually lenders would also charge a $1,000 to $1,500 processing fee and that was all the fees associated with the loan with the exception of appraisal, title, escrow and any other environmental reports associated with the purchase of the real property if any.
No More...
Lenders are now charging points in addition to the above fees. The reason why, the lack of the secondary market. As I have mentioned previously six months to a year ago a lender would sell their loans to the secondary market for six to ten points. That was the way lenders would be compensated and they would then be able to offer rebates to brokers and other bankers that they were working with.
Since there is no secondary market we now see lenders beginning to charge borrowers points to cover their risk as well as increase their yield on a loan. So don't be surprised when all of a sudden you hear there are points now associated with SBA loans. This structure is going to probably be the norm as more and more lenders leave the lending SBA arena with fewer lenders chasing and cherry picking the deals they want to lend on expect this trend to continue.
For more on SBA loans visit loanforbiz.com.
No More...
Lenders are now charging points in addition to the above fees. The reason why, the lack of the secondary market. As I have mentioned previously six months to a year ago a lender would sell their loans to the secondary market for six to ten points. That was the way lenders would be compensated and they would then be able to offer rebates to brokers and other bankers that they were working with.
Since there is no secondary market we now see lenders beginning to charge borrowers points to cover their risk as well as increase their yield on a loan. So don't be surprised when all of a sudden you hear there are points now associated with SBA loans. This structure is going to probably be the norm as more and more lenders leave the lending SBA arena with fewer lenders chasing and cherry picking the deals they want to lend on expect this trend to continue.
For more on SBA loans visit loanforbiz.com.
Tuesday, October 28, 2008
Daily Observations - When Will the Lenders Return?
This is the number one question that I am being asked every day. When will they return, and start to lend money again, when will credit be freed up, when will it trickle down to us again?
I have no idea! But the important point is that everyone I talk to is waiting for that magic event to happen, Free up Credit. Credit may never be freed up again the way we have seen it over the last couple of years. If you were breathing you could get a loan.
I am here to share that there are certain boutique lenders that are still doing business opportunity loans for QUALIFIED borrowers. The best advice at this point I can share with you is stick to the 5C's +E , pre-qualify everyone and when you have a strong borrower Don't Give Up, there are lenders out there that still want good deals.
Loan packaging and presenting of the loan has never been more important than it is now. Deal with a qualified loan developer/packager and you will get your deal done, if it makes economic sense to the lender as well as to yourself. Lenders still have their prohibitive lists so stay away from those areas that most lenders do not like, ie Start-ups, Restaurants, Rolling Stock based companies.
If you are thinking about purchasing a business and are going to be looking for Gov't Assisted Financing programs like the SBA, then buy a business that is manufacturing rather than service oriented. With manufacturing there is more collateral and usually less goodwill.
Banks do not like to finance goodwill, they consider it pie in the sky, and they want the seller to carry the value of the goodwill.
For more on SBA Loans visit loanforbiz.
I have no idea! But the important point is that everyone I talk to is waiting for that magic event to happen, Free up Credit. Credit may never be freed up again the way we have seen it over the last couple of years. If you were breathing you could get a loan.
I am here to share that there are certain boutique lenders that are still doing business opportunity loans for QUALIFIED borrowers. The best advice at this point I can share with you is stick to the 5C's +E , pre-qualify everyone and when you have a strong borrower Don't Give Up, there are lenders out there that still want good deals.
Loan packaging and presenting of the loan has never been more important than it is now. Deal with a qualified loan developer/packager and you will get your deal done, if it makes economic sense to the lender as well as to yourself. Lenders still have their prohibitive lists so stay away from those areas that most lenders do not like, ie Start-ups, Restaurants, Rolling Stock based companies.
If you are thinking about purchasing a business and are going to be looking for Gov't Assisted Financing programs like the SBA, then buy a business that is manufacturing rather than service oriented. With manufacturing there is more collateral and usually less goodwill.
Banks do not like to finance goodwill, they consider it pie in the sky, and they want the seller to carry the value of the goodwill.
For more on SBA Loans visit loanforbiz.
Monday, October 27, 2008
Daily Observation - Waiting...Cost her the Deal
Tonight I want to share with you an experience that has replayed itself over and over during the last couple of months. Procrastination cost the deal. While clients were debating the interest rates, the fees or any of the other myriad of excuses for not moving forward, when they finally decided it was time to move, the lenders left the arena.
Got a call today from a potential client in AZ, she wanted us to finally move on the biz op she called me about over forty-five days ago. I regrettably told her that the lender that was offering the program which I was confident I could fund was no longer offering the program. What was she to do?
We had to go back and completely restructure the proposal, by adding in the option of her buying the building rather than renting with the option to purchase a year out. We also have to have her put up a substantial amount of collateral, something that was not even contemplated forty-five days ago.
In essence her waiting to make a decision has cost her a lot more now that we may be able to fund the deal, but all of her property will have to be collateralized and she will also have to purchase the building. The building is less than the biz op so I still have our work cut out for us to find a lender.
For more on the creative process we take visit Loanforbiz.
Got a call today from a potential client in AZ, she wanted us to finally move on the biz op she called me about over forty-five days ago. I regrettably told her that the lender that was offering the program which I was confident I could fund was no longer offering the program. What was she to do?
We had to go back and completely restructure the proposal, by adding in the option of her buying the building rather than renting with the option to purchase a year out. We also have to have her put up a substantial amount of collateral, something that was not even contemplated forty-five days ago.
In essence her waiting to make a decision has cost her a lot more now that we may be able to fund the deal, but all of her property will have to be collateralized and she will also have to purchase the building. The building is less than the biz op so I still have our work cut out for us to find a lender.
For more on the creative process we take visit Loanforbiz.
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.
For more on Loanforbiz visit our website, we are still closing deals.
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.
For more on Loanforbiz visit our website, we are still closing deals.
Thursday, October 23, 2008
Daily Observations - Biz Ops No More , WHY?
Tonight I want to address why I believe that Biz Ops or Business Opportunity loans are becoming the dinosaur of 2008.
Some people would say the reason is that the banks are being tighter on credit, and that is the reason they do not want to lend on biz ops. Others may point to the lack of collateral for a business opportunity as the reason why the lenders don't want to lend. Still others will suggest the high failure rate of businesses in today's economy. And all of these answers would be right.
BUT...
I don't believe that they are the real reasons. I think the answer is purely greed of the lending community. What do I mean, I can hear you asking yourself? The answer in plain simple English is that the banks don't have a secondary market to sell these loans to anymore.
Before this debacle lenders would sell their SBA 7A Biz op loans to the secondary market for at least five to ten points, yes you heard me correctly five to ten points. Now there is no one to buy the loans, so why do them anymore. So even if Credit is loosened up as both Presidential candidates are advocating do not expect biz ops to be re-instated unless the secondary market comes back and lenders can once again sell their loans.
For more on the lending process ask me about our 95 page Special Report, GET Your Loan Closed!
Some people would say the reason is that the banks are being tighter on credit, and that is the reason they do not want to lend on biz ops. Others may point to the lack of collateral for a business opportunity as the reason why the lenders don't want to lend. Still others will suggest the high failure rate of businesses in today's economy. And all of these answers would be right.
BUT...
I don't believe that they are the real reasons. I think the answer is purely greed of the lending community. What do I mean, I can hear you asking yourself? The answer in plain simple English is that the banks don't have a secondary market to sell these loans to anymore.
Before this debacle lenders would sell their SBA 7A Biz op loans to the secondary market for at least five to ten points, yes you heard me correctly five to ten points. Now there is no one to buy the loans, so why do them anymore. So even if Credit is loosened up as both Presidential candidates are advocating do not expect biz ops to be re-instated unless the secondary market comes back and lenders can once again sell their loans.
For more on the lending process ask me about our 95 page Special Report, GET Your Loan Closed!
Wednesday, October 22, 2008
Daily Observations - I'm So Excited
GUESS WHAT?
I found a Lender that wants to lend, they will lend on any commercial property with normal underwriting guidelines as long as there is cash flow. Almost sounds like the way it used to be. They are even closing loans regularly the BDO told me.
So what's the catch I asked Him. How can you ignore what everyone else is "hung up" on and still be closing loans regularly.
Here's his answer as long as the client will deposit 20% of the loan amount in our bank we will approve their loan subject to normal underwriting requirements.
Here's a thought...If the client has an additional 20% to be put in the bank over and beyond their down payment do you think they really need a loan? That probably means in terms of a straight commercial loan 60 to 70% down including the extra CD at the bank, with CAP rates as low as they are. I might be exaggerating somewhat to make my point, but I don't think I am off the mark that much. Lower CAP Rates means lower net cash, and when you compare it to the higher purchase price, down payment has to be increased accordingly.
For a thorough discussion of this point and the Ten Secrets your lender does not want you to know email me about our Special Report; GET Your Loan Closed! with over 95 pages which is now available.
I found a Lender that wants to lend, they will lend on any commercial property with normal underwriting guidelines as long as there is cash flow. Almost sounds like the way it used to be. They are even closing loans regularly the BDO told me.
So what's the catch I asked Him. How can you ignore what everyone else is "hung up" on and still be closing loans regularly.
Here's his answer as long as the client will deposit 20% of the loan amount in our bank we will approve their loan subject to normal underwriting requirements.
Here's a thought...If the client has an additional 20% to be put in the bank over and beyond their down payment do you think they really need a loan? That probably means in terms of a straight commercial loan 60 to 70% down including the extra CD at the bank, with CAP rates as low as they are. I might be exaggerating somewhat to make my point, but I don't think I am off the mark that much. Lower CAP Rates means lower net cash, and when you compare it to the higher purchase price, down payment has to be increased accordingly.
For a thorough discussion of this point and the Ten Secrets your lender does not want you to know email me about our Special Report; GET Your Loan Closed! with over 95 pages which is now available.
Monday, October 20, 2008
Daily Observations - The Times They're Changing (Again)
Another interesting side note, as we go further and further down the road of tightening credit.
Tonight I was told by a very good lender that we have done a lot of deals that no longer will a property owner be able to refi a property and pull equity out unless they have owned the property for over two years. Yes you heard me correctly two years.
Gone are six months, and then a refi. Lenders want to know what someone paid for the property and that is still going to be the value unless they have done a great deal of changes to the property to help increase the income. But wait...
The increased income has to be stabilized for at least three years before they can count the new source of income. So PGI (Potential Gross Income) will not be taken into consideration anymore.
Oh wait, there 's still more. The lenders do not want to repay anyone for improvements that they made to the property even when it results in increased income.
So if I sound a little bit sarcastic tonight I'm not, I just want to report exactly what is occurring out there so clients and friends know exactly what is going on.
Yes we still can do loans, There are boutique local lenders that we can still entice with good deals. For more on this visit loanforbiz.
Tonight I was told by a very good lender that we have done a lot of deals that no longer will a property owner be able to refi a property and pull equity out unless they have owned the property for over two years. Yes you heard me correctly two years.
Gone are six months, and then a refi. Lenders want to know what someone paid for the property and that is still going to be the value unless they have done a great deal of changes to the property to help increase the income. But wait...
The increased income has to be stabilized for at least three years before they can count the new source of income. So PGI (Potential Gross Income) will not be taken into consideration anymore.
Oh wait, there 's still more. The lenders do not want to repay anyone for improvements that they made to the property even when it results in increased income.
So if I sound a little bit sarcastic tonight I'm not, I just want to report exactly what is occurring out there so clients and friends know exactly what is going on.
Yes we still can do loans, There are boutique local lenders that we can still entice with good deals. For more on this visit loanforbiz.
Thursday, October 16, 2008
Daily Observations - Biz Ops... A Thing of the Past?
"Biz Ops" as they are affectionately called by us professionals are business opportunities. Loans for acquiring a business where there is no real estate involved in the transaction my be a thing of the past, or at least on hold for quite a while.
Once again today another major lender which happened to specialize in "biz ops" informed me that they are no longer in the business of lending to anyone unless the deal has real estate as its primary component. Some may lend on the "biz ops" if they have real estate as part of the sale others are not lending on the "biz op" portion at all.
There are still a few boutique local lenders that will entertain "biz ops" but the list every day is getting smaller and smaller. I was presented today with an interesting statistic, 1/3 of all the SBA Lenders throughout the USA have stopped lending their capital. The reason, NO secondary market; no one to purchase the loans and pay the bank a premium for those loans.
Since there is no secondary market all loans have to be held by the funding bank as a portfolio loan. Therefore the lender wants bricks and mortar as security not "pie in the sky" ie goodwill, etc.
For more on commercial loans that we are still closing visit loanforbiz.
Once again today another major lender which happened to specialize in "biz ops" informed me that they are no longer in the business of lending to anyone unless the deal has real estate as its primary component. Some may lend on the "biz ops" if they have real estate as part of the sale others are not lending on the "biz op" portion at all.
There are still a few boutique local lenders that will entertain "biz ops" but the list every day is getting smaller and smaller. I was presented today with an interesting statistic, 1/3 of all the SBA Lenders throughout the USA have stopped lending their capital. The reason, NO secondary market; no one to purchase the loans and pay the bank a premium for those loans.
Since there is no secondary market all loans have to be held by the funding bank as a portfolio loan. Therefore the lender wants bricks and mortar as security not "pie in the sky" ie goodwill, etc.
For more on commercial loans that we are still closing visit loanforbiz.
Wednesday, October 15, 2008
Daily Observations - Land Development
Tonight I want to explore how land development financing has changes over the last six months. We have seen drastic changes as the experienced developer's funding sources have been dried up. It used to be that any experienced developer could either walk into their local bank, access their favorite insurance company or knock on the doors of Wall Street for funding. Not any more....
The experienced developers have made significant changes to adopt to this economic environment. The one thing that we have noticed is that the number of units per phase have been reduced dramatically. Where we used to see 50 to 100 units per phase and even greater we are now seeing 10 to 15 per phase, if they are still developing and moving forward at all.
Lets shift our focus to the individual that wants to develop land for their own facility such as a medical center etc. Lenders will still lend on these projects if the borrower has a substantial liquid net worth as compared to the money needed to be borrowed. Lenders are not lending money to acquire the land as there is no more land-banking.
But they will lend money to projects that are ready to pull building permits, provided the borrowers meet the 5C's +E test for SBA funding or 4C's + E for non-SBA projects, the "C" of character not being applicable.
The key is to be ready to pull the building permit within 30 days or less. Projects that are being funded are ready to be built. No political risk involved. Generally the only thing that should be outstanding at the time of funding for the project to move forward is the capital to move forward.
Visit loanforbiz to read much more about land development financing.
The experienced developers have made significant changes to adopt to this economic environment. The one thing that we have noticed is that the number of units per phase have been reduced dramatically. Where we used to see 50 to 100 units per phase and even greater we are now seeing 10 to 15 per phase, if they are still developing and moving forward at all.
Lets shift our focus to the individual that wants to develop land for their own facility such as a medical center etc. Lenders will still lend on these projects if the borrower has a substantial liquid net worth as compared to the money needed to be borrowed. Lenders are not lending money to acquire the land as there is no more land-banking.
But they will lend money to projects that are ready to pull building permits, provided the borrowers meet the 5C's +E test for SBA funding or 4C's + E for non-SBA projects, the "C" of character not being applicable.
The key is to be ready to pull the building permit within 30 days or less. Projects that are being funded are ready to be built. No political risk involved. Generally the only thing that should be outstanding at the time of funding for the project to move forward is the capital to move forward.
Visit loanforbiz to read much more about land development financing.
Tuesday, October 14, 2008
Daily Observations - Residential Issues
Tonight I want tot look at how residential real estate is being treated by commercial lenders as a form of collateral.
First of all we have had over the last couple of weeks commercial lenders totally discount to zero the value of residential real estate as a form of collateral for SBA Loans. We used to be able to pledge any type of real estate as a form of collateral, residential or commercial. But today the only form of collateral that the lenders are comfortable is commercial. I believe that is because commercial real estate has two forms of value.
The value of the real estate, but also the income value. If a lender takes back a commercial piece of property they can usually receive the income associated with that property should they elect to keep the property on their books in the unlikelihood instance that they are not able to sell the property.
The second way residential is being effected has to do with how SBA looks at equity. SBA requires a lien on all property that has greater than 25% equity. Therefore even if you are buying a commercial property if you have greater than 25% equity in any of your other property, ie. your personal residence` SBA will require that the residential property be taken as additional collateral.
So don't exaggerate your equity to make the banks feel more comfortable with the loan application. In essence its is now better for your commercial borrowers that they understate their equity. Chances are that the desk top appraisal software that the commercial lender uses will be much lower than the borrower thinks his or her property is worth.
Visit loanforbiz for updates to the SBA program as they are occurring.
First of all we have had over the last couple of weeks commercial lenders totally discount to zero the value of residential real estate as a form of collateral for SBA Loans. We used to be able to pledge any type of real estate as a form of collateral, residential or commercial. But today the only form of collateral that the lenders are comfortable is commercial. I believe that is because commercial real estate has two forms of value.
The value of the real estate, but also the income value. If a lender takes back a commercial piece of property they can usually receive the income associated with that property should they elect to keep the property on their books in the unlikelihood instance that they are not able to sell the property.
The second way residential is being effected has to do with how SBA looks at equity. SBA requires a lien on all property that has greater than 25% equity. Therefore even if you are buying a commercial property if you have greater than 25% equity in any of your other property, ie. your personal residence` SBA will require that the residential property be taken as additional collateral.
So don't exaggerate your equity to make the banks feel more comfortable with the loan application. In essence its is now better for your commercial borrowers that they understate their equity. Chances are that the desk top appraisal software that the commercial lender uses will be much lower than the borrower thinks his or her property is worth.
Visit loanforbiz for updates to the SBA program as they are occurring.
Sunday, October 12, 2008
Daily Observations - Loans Are Still Closing
Just a quick blog tonight, loans are still closing.
Last week, we closed a commercial loan for the purchase of an office condo. I very rarely announce the deals that we close, but I thought in today's economic environment. It was something important for everyone to hear.
We closed this particular transaction in less than 45 days from start to finish. The appraisal for the office condo came in at exactly what the purchase price was. The lender pre-approved the transaction, and at closing pricing was even more competitive than what was written in the letter of intent.
The only reason I'm sharing this information tonight is that I do not want anyone to give up. Even when the news is very bad, there still are lenders that are lending their own capital, and portfolioing their own loans. If you're deal makes economic sense, is cash flowing, and have a strong buyer, there is no reason why you cannot fund the loan.
Do not let this economy control you, you must control your own economy.
Visit loanforbiz for much more information on small business and commercial loans.
Tuesday, October 7, 2008
Daily Observations - I "Hope" this is not a TREND
Short and to the point this evening. One of my major lenders has completely stopped doing any SBA 7A loans that do not have a commercial component.
Very simply, we used to be able to do SBA 7A loans with residential collateral as long as the collateral covered 90% of the loan. As of today the only collateral this lender will accept is a commercial piece of property. What does that say about their faith in the residential market coming back,,,Not Much!!!
They will do loans that are SBA that have real estate as part of the purchase, but without real estate as part of the purchase and no commercial real estate as collateral - NO LOAN
The problem I have is that this particular lender is usually a trend setter, and if other banks and or financial institutions follow suit, we are only going to go deeper into the muck and mire.
Now for the good news this evening we are still closing deals!!!!
There are still lenders that want depository relationships and as such are looking at these deals differently than they did before this debacle started to unwind.
Visit us at LoanForBiz
Very simply, we used to be able to do SBA 7A loans with residential collateral as long as the collateral covered 90% of the loan. As of today the only collateral this lender will accept is a commercial piece of property. What does that say about their faith in the residential market coming back,,,Not Much!!!
They will do loans that are SBA that have real estate as part of the purchase, but without real estate as part of the purchase and no commercial real estate as collateral - NO LOAN
The problem I have is that this particular lender is usually a trend setter, and if other banks and or financial institutions follow suit, we are only going to go deeper into the muck and mire.
Now for the good news this evening we are still closing deals!!!!
There are still lenders that want depository relationships and as such are looking at these deals differently than they did before this debacle started to unwind.
Visit us at LoanForBiz
Monday, October 6, 2008
Daily Observations - What is Going On???
The market was all over the place again. We were down approximately 780 points but closed at -364. What a comeback! Europe is bringing us down as well as Germany and France.
So what's one to do.
I don't usually talk about investment strategy but I wanted to share what a few of my friends are doing as well as what the knowledgeable advisers are suggesting.
STAY THE COURSE
The market has plummeted so far that if you sell now you are selling into a panic mode, ride the storm out, The market always comes back. On a personal note when I was an investment banker I sold my own parents California Tax Free Bonds and when in the early 80's Cal Tax Free Bonds had a major free fall when the Orange County bonds went into default I recommended for them to sell. Had they not listened to their (not knowledgeable) son, they would have been much better off by holding them and still receiving the dividends that were still thrown off.
With that story in the back of my mind I called my Investment Counselor, the one I use to work for and asked him what to do and he gave me the above advice. So for what ever its worth tonight I offer the same advice to you. (seek your own counsel when making any investment decisions)
Lastly Make your own economy, don't let the economy make or in this case break you.
So what's one to do.
I don't usually talk about investment strategy but I wanted to share what a few of my friends are doing as well as what the knowledgeable advisers are suggesting.
STAY THE COURSE
The market has plummeted so far that if you sell now you are selling into a panic mode, ride the storm out, The market always comes back. On a personal note when I was an investment banker I sold my own parents California Tax Free Bonds and when in the early 80's Cal Tax Free Bonds had a major free fall when the Orange County bonds went into default I recommended for them to sell. Had they not listened to their (not knowledgeable) son, they would have been much better off by holding them and still receiving the dividends that were still thrown off.
With that story in the back of my mind I called my Investment Counselor, the one I use to work for and asked him what to do and he gave me the above advice. So for what ever its worth tonight I offer the same advice to you. (seek your own counsel when making any investment decisions)
Lastly Make your own economy, don't let the economy make or in this case break you.
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.
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.
Thursday, October 2, 2008
Daily Observation Day 6-9
I have to apologize for missing days 6 through 9, but I was forced to stop writing for some minor health issues that undertook me. Well I'm back at my PC again, and I missed not continuing this great debate that our economy is at the forefront.
I'm sure everyone now knows that the stock market has been all over the place up in anticipation of the Senate vote with all of their "pork"; down because the House has not come to a resolution yet. Even today as I am writing tonight the market dropped almost 350 points. Every night I have quoted CNN but tonight I am not going to go there.
We need to get to the core of the problem to be able to free up our credit. The question is will the Bail Out free up credit? The answer is yes but it will not be immediate. Tonight I want to expose what I believe is going on, the House is afraid to vote the way they want to because so many of the Congress officials are up for re-election. We need to take politics off the table so we can have much better financial management of all our assets.
This in essence is the point that no one seems to be recognizing. We are all talking about buying the assets of troubled financial institutions. But what we are forgetting is that the lenders that you and I need to be more free with credit are not being effected by the Bail Out.
The question has to be How does the lenders become comfortable to be able to relax their stringent criteria for lending? The lenders that we are talking to everyday have told me that number one even with the approved Bail Out they are not going to relax their policies, and on the other hand they have told us that because premiums in the secondary market are being reduced substantially they are raising their rates within the next 30 days.
So how is this going to help us? The lenders have to become comfortable so that they can lend again. THIS IS THE KEY
Remember SBA Loans are still getting funded each and every day, by us and other financial brokers. Visit loanforbiz for all your financing needs.
I'm sure everyone now knows that the stock market has been all over the place up in anticipation of the Senate vote with all of their "pork"; down because the House has not come to a resolution yet. Even today as I am writing tonight the market dropped almost 350 points. Every night I have quoted CNN but tonight I am not going to go there.
We need to get to the core of the problem to be able to free up our credit. The question is will the Bail Out free up credit? The answer is yes but it will not be immediate. Tonight I want to expose what I believe is going on, the House is afraid to vote the way they want to because so many of the Congress officials are up for re-election. We need to take politics off the table so we can have much better financial management of all our assets.
This in essence is the point that no one seems to be recognizing. We are all talking about buying the assets of troubled financial institutions. But what we are forgetting is that the lenders that you and I need to be more free with credit are not being effected by the Bail Out.
The question has to be How does the lenders become comfortable to be able to relax their stringent criteria for lending? The lenders that we are talking to everyday have told me that number one even with the approved Bail Out they are not going to relax their policies, and on the other hand they have told us that because premiums in the secondary market are being reduced substantially they are raising their rates within the next 30 days.
So how is this going to help us? The lenders have to become comfortable so that they can lend again. THIS IS THE KEY
Remember SBA Loans are still getting funded each and every day, by us and other financial brokers. Visit loanforbiz for all your financing needs.
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