§ Acquisition and Development § Adjustable Commercial Mortgage § Construction Mini Perm § Construction Loan with Take-out § Fixed Rate Commercial Mortgage § Hard Money Loan § Interim Loan § Joint Venture § Participating Mortgage § Real Estate Sale and Leaseback § Real Estate Purchase Loan § Second Mortgage § Wraparound Mortgage Acquisition and Development Acquisition and development financing involving a SBA "Certified Development Company" (CDC) provides you with long-term, fixed-rate financing for major fixed assets (land, buildings, etc.). This program contributes to community economic development. The CDC works with commercial lenders to provide financing to businesses. This program includes a loan from a commercial lender that covers 50% of the project and a second loan for up to 40% of the project cost from the CDC that is 100% SBA guaranteed for a combined 90% LTV. Funding from this program can be used for: § Purchasing land and improvements, including existing buildings § Grading, street improvements § Utilities, parking lots and landscaping § Construction of new facilities § Modernizing, renovating or converting existing facilities § Purchasing long-term machinery and equipment The loan program cannot be used for: Working capital or inventory, consolidating or repaying debt, or refinancing. Adjustable Commercial Mortgage Adjustable commercial mortgage funding is a real estate loan with an interest rate that changes periodically, according to an index that is selected when the mortgage is issued. With an ARM (Adjustable Rate Mortgage), you might qualify for a larger loan and your ARM could be less expensive than a fixed rate loan over a long period. There are a variety of programs to choose from: § Easy in/easy out § Variable/convertible loan § Adjustable rate with a future option to increase loan § Simple interest loans with or without graduated payments § . . . and more To compare one ARM with another or with a fixed rate mortgage, you need to know about indexes, margins, discounts, cap structures, negative amortization and convertibility. Provide us with some information and we will match you to sources who can help. Construction Mini Perm Construction mini perm financing for income producing properties. This particular method of financing is used primarily for income producing projects that need to establish an operating history prior to applying for long-term, permanent financing. They are usually applicable to: § Shopping centers § Office buildings § Industrial properties § Large apartment complexes Funds from a construction mini perm loan are typically secured during the project construction phase and last through the rental stabilization period. Mini perm loans usually carry a term length of 3 to 5 years and, as a result, they are always a short-term financing solution. The loan matures with a balloon payment at the end of the term. Construction Loan with Take-out Construction loan with take-out refers to short-term financing of real estate construction followed by long term financing, called a "take out" loan. This "take out" loan is issued upon completion of improvements. Construction loans normally work together with take-out loans. For example: -
The land developer gets a construction loan to build a cluster of homes. -
When all the homes are ready to sell, a buyer gets a take-out loan from a lender to purchase one of the new homes. -
The builder uses part or all of the money from the sale towards paying off the construction loan. NB. The disbursement of the take out loan is contingent upon completion of construction and, in most instances, needs to be applied toward the preceding construction loan. There are funding sources in our directory that provide this type of interim financing. Fixed Rate Commercial Mortgage Fixed rate commercial mortgage products are mortgages that have a fixed interest rate and payment for the full term of the loan. These loans make it easier to budget, especially over the long term, and offer stability across an ever-fluctuating market. Typical properties include: Multi-family, anchored, unanchored retail, full and limited service hotels, offices, light-industrial, self-storage, and senior housing. Term: Typically 5 to 20 year maturities. Rate: Interest rates set at spreads usually ranging from 150 to 275 basis points over corresponding Treasuries, depending on property type and underwriting criteria. Loan to Value: Subject to underwriting criteria, generally up to 80% LTV. Additional features such as: Prepayment, assumption, liability and amortization will be thoroughly explained once you've contacted a lending representative from your free matched list of funding sources. Hard Money Loan Hard money loan guidelines and typical transactions include: § $500,000 to $10,000,000 per transaction/same project § Up to 75% loan-to-value improved-marketable structures § Commercial property acquisition, construction, and refinancing § Bank workouts, bankruptcies and foreclosures are common § Loans on commercial buildings, vacant land, and more ... Got a tough multi-million dollar deal? Consistently hearing "No" to your deal because it doesn't fit the conventional box? Need a short term loan? Are traditional lenders taking forever to close? With "private lenders" the hard assets are the key. Hard money loans are property-driven and typically have a much quicker turnaround. Creative transactions such as: interest only payments, partial deed release, and participations are usually considered. Interim Loan Interim loan is commonly utilized in real estate transactions. Term: These loans range from 6 months to 5 years with the most typical term being 3 years. Rate: Interest rates most often float over a defined loan index for the term of the loan and adjust or reset at maturity. In some instances the rate can be fixed. Amortization: These loans are primarily interest only and do not amortize over the loan term. Prepayment Penalties: Yes, however, some programs will waive fees if converted into permanent financing (which is usually the case). An interim loan can give you a stronger negotiating position and you can purchase a property without a contingency on the sale of your existing property. Joint Venture Joint venture financing for commercial property Joint venture financing is a means of structuring a mortgage in order to help you, the client, maximize cash flow potential. How? By "teaming" you with a lender as an investor. Definition of a joint venture: similar to a partnership in that it must be created by agreement between the parties to share in the losses and profits of the venture. It is unlike a partnership in that the venture is for one specific project only, rather than for a continuing business relationship. In this case, the joint venture concerns commercial real estate and the lender-borrower relationship. Borrowers do not always start out looking for partners, but sometimes recognize the value of sharing equity over "straight" debt-financing. Structured Joint-Venture Financing can be complicated and is not appropriate for all projects. Provide us with some information and we can give you a free matched list of commercial real estate lenders and equity investors. When contacting any of your matched funding sources, be sure to inquire about joint venturing. Participating Mortgage Participating mortgage - a creative alternative Participating mortgage is a loan that contains clauses and conditions under which the lender participates in the revenues of the property. The level of participation may be calculated from the gross receipts, net operating income, net income or net cash flows of the property. Also known as "kickers", these loans provide: § The lender with an effective tool to spread, and thus reduce risk § The lender with additional incentive to make your loan § The lender with a more flexible means of structuring your loan Provide us with some information and we can give you a free matched list of commercial real estate lenders. When contacting any of your matched funding sources, be sure to inquire about this type of financing. Real Estate Sale and Leaseback Real estate sale and leaseback program Real estate sale and leaseback financing is when a business sells its commercial property for its fair market value and then immediately leases it back. Most importantly, you retain control of the property. Here are some of the resulting benefits: § Free-up capital for re-investment § Improve the balance sheet § Defer a substantial portion of the tax liability § Receive 100% of fair market value § Low payments with long terms (up to 25 yrs) This has become an increasingly popular means of generating capital for immediate use. A real estate sale and leaseback program unlocks the value in your real estate assets and provides you with immediate working capital. Real Estate Purchase Loan Real estate purchase loan funds are typically business loans that are collateralized with commercial real estate. Loans to expand or improve your existing business and loans to refinance existing debt. Both conventional and government guaranteed loans are available. Financing can be secured for virtually any kind of business, including but not limited to: § Motels § Apartments § Shopping centers § Retail stores § Office buildings § Automobile dealerships § Owner occupied buildings § Manufacturing facilities § Health care facilities § and more . . . Provide us with some information and we can give you a free matched list of commercial real estate funding sources. When contacting these sources, be sure to first ask about max LTV's and property-type and/or regional restrictions. Second Mortgage Second mortgages - an important commercial real estate tool. Commercial second mortgages are normally used in conjunction with a new first loan. Typically the second mortgage will have a term of no less than five (5) years with interest only payments. While second mortgages can be critical in some situations, you must carefully consider your ability to service both loans. There are many clear advantages to this type of creative financing. The most frequent use is a second mortgage that reduces the LTV (loan to value) of the first loan in order to allow you to more easily qualify for the loan. An example would be where the primary lender (first mortgage holder will only lend 70% LTV and you only have a 20% down payment. A second mortgage can be used to make up the difference. There are a variety of options available to you such as: interest only payments, annual payments, exit fees, etc. that will help keep your immediate payments down and defer the costs of the second mortgage. The idea is to give the property time to appreciate and thereby allow you to refinance and consolidate both the first and second mortgages at a later date at a then lower LTV. Wraparound Mortgage Wraparound Mortgage - A creative financial tool Wraparound mortgage, also called an all inclusive trust deed, is a financing tool where a new mortgage is placed in a subordinate (secondary) position to the original mortgage and the new mortgage includes the unpaid balance of first. The wraparound mortgage is a creative way to allow a buyer to purchase property without having to qualify for a loan or to pay closing costs. The contract is made between the buyer and seller with seller remaining on the original mortgage and title.
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