Learn To Be A Fix & Flip Investor: commercial loan

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Thursday, November 2, 2017

Commercial Loans In Texas – What You Need To Know About Working With the SBA-Part 4 – Selecting the Right Lender

Once you have all of the paperwork in place and understand the process of obtaining a commercial loan in Texas through the Small Business Administration, you must now begin the process of figuring out which lender is going to serve your needs. Picking the correct lender is very important in making sure that your loan process runs smoothly.

While they might all seem the same on the surface, there are vast differences amongst lenders, especially when it comes to a loan through the Small Business Administration. In order to make your process as easy and stress-free as possible, you will want to find a skilled lender that not only have experience in commercial loans, but also one that has experience dealing with the various aspects of SBA loans.

One of the differentiating factors with a lender who is familiar in dealing with the Small Business Administration is whether or not they are a “Preferred” lender. This is important, as an approved lender (noted by the preferred status) has already cleared some of the basic requirements put forth by the SBA and this will greatly speed up the process for the borrower. If a lender is not preferred, they must initially submit the borrower’s credit application to the SBA directly. A preferred lender can skip this step.

Another factor that will help you pick the correct lender for your needs with your commercial loan through the Small Business Administration is whether or not they have a department that is dedicated solely to these types of loans. Will you receive specialized attention? Or will you just be another application that is thrown into the stack. Lenders that have dedicated personnel are going to make your loan process much smoother and will help you to feel at ease with the process.

Along with selecting the right institution, it is critical that you also select the right loan officer. This person is going to be working with you and will be critical to your success. If you do not get along with your loan officer, or do not feel they would do a good job, then that is a sign that your commercial loan process is not going to be as smooth as it should be. Your loan officer should not only be familiar with commercial lending in general, but also be familiar with Small Business Administration loans specifically.

What other questions should I ask a potential lender about my commercial loan in Texas through the SBA?

You will no doubt have many questions when trying to find a potential lender, as you well should. There are two basic questions that every lender should have answer to very quickly. In fact, they might even have printed documentation for you. The first is what sort of supporting documents this specific lender requires for the loan process. The second is how long this specific lender expects the commercial loan process to take. Good lenders will be able to give you concrete, precise answers.

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Loans In Texas – What You Need To Know About Working With the SBA-Part 3 – Getting Started

So you have decided that obtaining a loan from the Small Business Administration is a route that you would like to take. And you have also determined that your small business is eligible, according to their guidelines. Here is what you need to do to prepare for an SBA commercial loan in Texas.

Congratulations on making it this far! The world of commercial lending can be an intimidating place, so the fact that a borrow starts to get their ducks in a row to apply for a loan is a huge step in the right direction, and is a giant leap forward in making business dreams come true.

But how does a potential borrower get started with a commercial loan? The first thing is to understand that the process does not happen overnight. It is going to take some time and that is okay. So just be patient. A borrower is going to spend a great deal of time organizing, gathering and sorting various financial documents.

So get organized. If you are not a numbers person, you might want to become one. If you have a professional accountant, now would be the time to begin to understand what exactly they do. If, however, you already have your nose in the books, then you are going to be just fine. If you understand how all of your accounts work, and how to access all of the information, you are already ahead of the game and will simply need to organize the information to present to a potential commercial loan application. In addition to this, know exactly how you will be using the loan and how it will benefit your business. This goes beyond simply crunching the numbers. A solid business plan, that is updated to include the expansion that will be possible with the commercial lending, might not be required by a lender, but it most certainly will not hurt to have in place before beginning the application process.

Also, pay attention to detail. It is far better to provide too much information than not enough. The SBA and the lender are going to determine if you are financially competent enough to not only be responsible with their money, but also if you are going to pay it back. If they have to pull information out of you, it does not bode well for you being fiscally capable of handling significant debt on your own. That is not an impression that you want to leave with potential lenders.

Finally, keep your financial records up to date. Not only does this apply to the application process, but also as the loan is current. You should try to fall no further behind than 60 days. If you are detail oriented and organized, this should not be a problem at all. No lender, who is looking to grant you a commercial loan, is going to make a decision based on financial information that is outdated.

What strategies can I use to ensure the highest degree of success with my commercial loan in Texas?

Plan to devote a great deal of time to this process. If you must, seek help, whether that be mentors or other small business owners who have gone through the process. Remember, you do not have to do this alone. There are plenty of others who have successfully obtained a commercial loan, but it does not come without a great deal effort.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Commercial Loans In Texas – What You Need To Know About Working With the SBA-Part 2 – Eligibility

Seeking funding for any commercial enterprise, whether it be real estate or business expansion, can be a confusing endeavor. There are so many different options that it is hard to know where to begin or to determine which is the best for you. So how do you know if seeking a commercial loan through the Small Business Administration in Texas is right for you?

Knowing what you are getting into before you begin the application process with the Small Business Administration (SBA) is very important, as the application process for a commercial loan is very arduous. The good news is that, if all else fails, you can consult a lender and ask them questions about SBA loans.

One of the ways that the Small Business Administration is able to work with small business owners is by partnering with lenders. The SBA does not directly lend the funds to small businesses, but they work with banks and other lenders to not only find the correct fit for a small business, but also to underwrite a portion of the commercial loan. This takes away a great deal of the risk from the lenders and enables them to be more flexible in their offerings. Because the Federal government is taking on a portion of the risk, lenders are able to grant loans to small businesses and individuals that would otherwise not meet their criteria.

Because of this, however, lenders are the ones to set the interest rate and it might vary from lender to lender. While this can be confusing, if a borrower is organized and detailed oriented, this will not be a problem.

Even still, not all businesses are eligible for a loan through the Small Business Administration. Because of the risk that the government is undertaking, there are additional requirements from the SBA. Lenders might also have a list of requirements (even if they are lowered from a traditional loan). Some of the basic requirements from the Small Business Administration in lending commercial loans are: the business must be “for profit,” the business must be of a certain size, and the business must be able to show that they will be capable of paying back the loan. A much more subjective requirement is that the business must have “reasonable” equity from the owner or partners.

Not every business is able to obtain a loan from the Small Business Administration. For example, even if a small business meets all of the requirements but is a financial institution or a certain type of insurance provider, they are automatically ineligible for any loan through the SBA.

What if I still don’t know if I am eligible to receive a commercial loan from the SBA for my business ventures in Texas?

If you have looked at all of the requirements and still have some confusion about if you are eligible, the best thing to do is to simply ask. It would be an absolute waste of time to go through the extensive process of applying for a commercial loan through the SBA, only to find out that you were not eligible from the start.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Monday, October 30, 2017

Commercial Loans In Texas – What You Need To Know About Working With the SBA-Part 1 - Benefits

While there are many sources of commercial loans in booming economies, like that of Texas, many small business owners often turn to the Small Business Administration (SBA) for their lending needs. Even though many small business owners find lots of helps with the SBA, there is a lot to the process.

Dealing with the Small Business Administration is like dealing with any other government bureaucracy. The benefits might be very good for you, but wading through the endless amounts of red tape and paperwork can be discouraging to even the most stalwart of pursuers.

But why should a business owner pursue a commercial loan from the Small Business Administration anyway? Why is the SBA different than any other lender? There are actually a number of benefits that an SBA loan has over traditional lenders,

One of these benefits is that the cost of obtaining such a loan is usually lower than it would be by pursuing a similar loan through a bank or other traditional lender. This means that the borrower will have to put forward a smaller down payment (and some SBA loans actually include, or have provisions to include, the entire cost of the loan).

Another benefit that is incredibly appealing to many small businesses is that there are often lowered requirements in order to secure a loan. While many traditional lenders require sources of collateral or an excellent credit history in order to secure a commercial loan, the SBA, for the most part, does not require a borrower to have any collateral. In fact, the SBA often grants businesses loans based on cash flow, rather than credit history. This makes it an excellent source of funding for those business owners who have taken some financial hits in the past. If decent cash flow can be demonstrated, it is most likely that the SBA will be able to work with you to find funding.

Term lengths and interest rates are another appeal of the SBA to small business owners. The repayment terms are usually much longer than that of traditional lenders, with many commercial loans having a term of up to 25 years. That is a tremendously long period of time to pay a loan back in the world of commercial lending. In addition to a more agreeable timetable, the interest rates of loans from the SBA also has the potential (this is not always the case) to be lower than traditional sources and significantly lower than hard money loans. Longer terms and lower rates mean that small businesses can focus on growth, rather than debt.

How can I use the benefits to my advantage if I am looking for a commercial loan to expand my business in Texas?

If you are in a position where your small business needs access to capital, but you are either just starting out or have had some credit problems in the past, the Small Business Administration might be an excellent source of help with a commercial loan to help you achieve your business goals. This could even help you to take advantage of a great business opportunity with a commercial loan in Texas.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Sunday, October 15, 2017

How to Find the Right Commercial Lender for Your Business Loan Needs

When you determine that you are ready to obtain a loan for your company, it’s important that you do your research in all areas. One of the most important things to do it find a commercial lender that you feel confident will get the best loan terms for you.

The world of commercial loans can be complex and confusing. That’s why it’s all the more crucial to find a lender that will make your loan the priority. Your commercial lender has the power to negotiate better rates, terms, and repayment structures, and can point you in the right direction throughout the process of applying for a loan.

When you are seeking a loan for your company, there is no shortage of options. There are various types of loans that are specific to certain business needs, such as equipment financing, and there are even short term and long term loans that are defined by their loan amount and payback timeframe. If you are seeking your first loan, the waters can quickly get murky and you can easily become frustrated, and even make a hasty decision just because you are so weary from the process. Seeking the counsel of a commercial lender can help you avoid the pitfalls associated with applying for a first time loan.

Traditional banks can serve as a direct commercial lender when it comes to their commercial offerings, but working with conduit lenders is another option. This means a conduit lender can help approve a loan and maintain it for a specified amount of time. After that term, however, they can sell it to a third party agency that is security backed. This is typically done as a short-term investment called securitization. Loan payments are designed in this type of financing to avoid prepayment, which allows for a great deal of security.

Pretend you are interviewing an employee when you meet with a lender

Consider it an interview for the job of being your lender and advisor. When you talk to commercial lenders, make sure you ask plenty of questions about their area of expertise and if they have ever worked with a business similar to yours, with similar loan needs and budgetary restrictions. Getting testimonials is a good idea, too. Before seeking commercial lenders online, ask around – talk to other small business owners to see if they have pursued loans with the assistance of a lender and if they had a favorable experience. If you have a solid relationship with your bank, that is a good place to start as well.

Take heed: not every commercial lender will handle your loan application in the same way.

Sometimes there is no “hard and fast” way to tell if you have found the right lender for you. Some of it is about trust. Some of it may come down to customer service or a “feeling” that this person has your company’s best interest at heart. Regardless of how you proceed with your loan, make sure you are happy with all the terms before signing any documentation. It’s also a good idea to have an experience financial attorney look over the agreement to ensure there are no hidden fees or “fine print” that your lender failed to mention. All in all working with a lender should be a win-win situation.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Tuesday, October 10, 2017

Commercial Mortgages: How to evaluate the different types of commercial mortgage

C-loans claims there are 12 distinct commercial mortgages. The following article groups these 12 types under three categories, permanent, equity and short term commercial loans.

Essentially conventional commercial mortgages differ from residential mortgages, in that commercial mortgages finance the purchase of commercial property. Standard commercial mortgages are sometimes referred to as “permanent loans,” and characteristically have terms longer than five years with some degree of amortization.

Commercial property owners can also take out second mortgages. However second mortgages are uncommon when it comes to commercial property. The terms of many permanent loans expressly forbid borrowers taking out a second mortgage. A more common practice is for corporations to borrow against shares ownership, known as a mezzanine loan. In case default mezzanine loans usually grant lenders the option to buy back shares ownership in a corporation and seize control of the companies property.

Some types of commercial financing are not even loans at all.These arrangements are termed equity partnerships. In a preferred equity partnership a “preferred” investor lends a corporation money for a fixed share of the company’s profits in the future. In addition there are joint venture and venture equity partnerships. Joint venture partners often finance the full price of a construction project in exchange for a fixed share of the properties future income. Joint partnerships are far more difficult to secure in comparison with venture equity partnerships. Venture equity partnerships often involve smaller originators, such as debt funds or real estate investment trusts.

Commercial mortgages differ from residential mortgages mainly in the variety of short term loan options avalable.

Bridge loan are short term loans which give a borrower time to lease or renovate a property. The terms of bridge loans generally run 1 to 2 years. Bridge loans are usually interest only and offer a considerably faster approval process than a traditional commercial mortgage. Construction loans are another type of short term commercial lending. As the name implies, construction loans are used for the purpose of building new commercial developments. Construction loans often have terms of 12 to 18 months, and are only released as a construction proceeds. Notably borrowers only pay interest on the amount of the loan released throughout the course of the construction project rather than paying interest on the total loan amount.

Construction lenders often require borrowers to take out unique and sometimes very costly commercial mortgages before any loan is approved, known as take out commitment loans.

Take out commitment loans are conventional loans taken out before the balloon payment on a construction loan comes due. Take out commitment loans are sometimes issued in the form of promissory notes. This averts the risk for a construction lender that a borrower will default when a construction loan comes due. These notes are referred to as forward and stand by take out commitment loans. These loans take on the form of a letter issued by a mortgage provider that promises to deliver a takeout loan within a period of 18 months after a construction project has been completed. Often these letters stipulate certain construction specifications or occupancy rates. They are usually expensive and often go for one to two points of the total loan amount. There are also stand-by take out commitments loans. Stand by take out commitment loans have far more onerous terms than forward take out commitment loans.

Commercial loans come in many shapes and sizes. It is important to have a clear understanding of what each type of loan entails and how each loan should applied. A conventional mortgage can help purchase property, a mezzanine loan or a bridge loan can help fund expansion and a construction loan is obviously used to get new projects off the ground. Take out commitment loans are usually meant to appease construction lenders, who take on the risk that a borrower may default when a construction loan comes due.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Monday, October 9, 2017

Strategies For Negotiating With Commercial Lenders

In order to get the best rates and terms for your commercial loan, you are going to have to negotiate with commercial lenders. However, there are strategies that you can use to enhance your chances of successfully getting the terms that you want.

If you are like most borrowers, you might feel like you are at a disadvantage when it comes to dealing with commercial lenders. They know more about the process and they have something that you want. But this does not necessarily give them all of the power. In fact, you, as a borrower, do actually have power to wield in negotiations with lenders.

One of the biggest strategies that you have as a borrower is your ability to walk away from a lender. It might not always seem like it, but they want your loan. It is the way that they make money. Even though you are coming to them for the loan, commercial lenders only get paid on loans that are actually underwritten and taken, not on inquiries. This gives the borrower a great deal of power.

The best way to use this power is to play different lenders off against each other. Rather than directly negotiating with a lender, get them to offer better terms by letting them know that you have other options that are better. Commercial lenders are not going to drop their rates and terms easily if they know that they are your only option. This would only cost them money. But, if they might lose your business if they do not adjust to your needs to keep it, they are far more likely to drop their rates without you having to do any negotiating whatsoever.

Another strategy is to front end the majority of your negotiations. Once the application process has started, it is very difficult for a borrower to find any leverage to have anything in the deal changed. But before you sign on that dotted line, the lender does not know if you are going to sign or walk away from the deal. This, again, give you the leverage that you need to make sure that your critical issues are addressed properly by the lender.

These sound like great strategies for negotiating with commercial lenders, so what could possibly go wrong?

Now, this does not mean that you should be terribly aggressive about this tactic. Doing so in the incorrect manner might backfire. So, it is okay to play lenders against each other, but do not go overboard with it. Threatening and being combative is not going to win you any battles in this, and might end up burning you tremendously.

And when it comes to negotiating before you sign the application, make sure that you limit your demands to what is actually critical to you. Decide what this is going in to the negotiation and do not overreach. If you have too many demands, you are likely to upset the lender and working with you is going to look like more of a hassle than it is worth. So make critical demands before you sign that dotted line, but convey to the lender that you are detail oriented and not overreaching.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Sunday, October 8, 2017

Is One Commercial Lender Better Than Any Other?

When you venture out to seek funding for a commercial real estate project, the number of options can appear to be daunting. But which one is best for you? And is there really any difference between one commercial lender and any other?

In the commercial lending industry, there are a variety of sources of loans for borrowers, depending on a variety of factors, such as credit score, down payment size, property value and security collateral. Each type of commercial lender has different qualifications and benefits for their borrowers, which makes choosing the right type of lender highly subjective.

One type of commercial lender is a life insurance company. In fact, these lenders have the best rates and terms on the market. This, however, is most likely not going to fit the needs of any borrower with the exception of a very small few. Typically, receiving a loan from a life insurance company not only comes with a very large down payment (nearly half), but the loan is usually over $5 million. There are also very strict guidelines for the types of property that can be acquired with a loan from a life insurance company. If you manage to secure a loan, you are in a very good position for commercial real estate.

Another commercial lender with excellent terms are commercial mortgage-backed securities (CMBS). These lenders also deal with very large loan amounts and usually involve the purchase, building or renovating of multi-family housing units, offices spaces or large retail areas. CMBS lenders do not usually work with loans smaller than $3 million, but they are much more likely to deal with properties that need work, unlike life insurance companies.

One of the newest players in the commercial loan market are credit unions. Not only do they typically have better rates than commercial banks, but they are usually more localized and willing to work with business owners in the area. They have location restrictions on most of the properties that they are willing to finance and the loans that they grant have a tendency to be on the smaller side of commercial real estate (around $1 million).

The quickest type of commercial loan provided by a lender is a hard money loan. These are usually for much smaller amounts, but have a much higher interest rate. All things considered, however, they are much easier to qualify for and have much shorter repayment terms.

With all of the different types of loan and qualifications, how do I know which type of commercial lender is best for me?

The first thing to do is to start asking questions. If you are seeking a loan for a property, talk to lenders and figure out what will work best for you. It is better to spend some time figuring out where your property falls with a commercial lender than to apply for a loan that you will not receive. Or, even worse, to be granted a loan that doesn’t fit your needs and will end costing you in the end. Research requirements and the types of properties typically served by lenders in your area.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Sunday, September 24, 2017

Default Provisions on Commercial Loans

No one every takes out a loan and plans on failing to make the payments. But bad things can and do happen so you should always understand the default provisions for commercial loans that you sign.
When you are requesting commercial loans for a property purchase, it is likely that the main collateral for the loan will be the property you are buying. But there are some cases where the lender feels that there is an addition level of risk and they require more collateral for the loan. This additional collateral could be inventory, vehicles, equipment or even your accounts receivable. The perceived additional risk could be due to your businesses stability, the amount of the loan or even the overall volatility of your industry. The length of time in business can also be a big factor in determining the risk involved in the loan.
You will also want to determine if the loan is a recourse loan or a nonrecourse loan. A recourse loan requires that an individual, usually the owner or owners, to sign a personal guarantee in case the business fails. This is a way for the lender to be assured of getting paid even if the business closes its doors. A nonrecourse loan does not require you to personally guarantee the loan. In the event of a default, the lender can foreclose on the property but you are not personally responsible for any remaining balance that is due on the loan.
If you have multiple commercial loans with the same lender you will want to verify if there is cross collateralization among the loans. This means that the lender ties the collateral used on any one loan to all of the loans that they hold for you. What this means for you is that if you default on any one loan then the lender can foreclose on any of the collateral on any of the loans. It is to your advantage to seek a lender who does not impose cross collateralization.
Beware of Cross Default Clauses
Another clause that your lender can include if you have multiple loans is called a cross default clause. This ties all of your loans together in the event of a default on any loan. So if you default on a single loan then the lender has the right and ability to increase your fees and rates on any or all loans and they can also demand immediate payment on all of your loans. Again, this is a big disadvantage for the borrower and you should try to avoid commercial loans that include this clause.
Beware of Operational Covenants
Operational covenants are clauses that are included in the loan terms that limit or dictate how you must handle certain situations or how you must run your business pertaining to certain aspects or functions. Some clauses might limit your ability to seek additional loans during the term of the existing loan. Another common type of clause eliminates your ability to enter into new business agreements or leases without the approval of the lender. These covenants can be negotiated before you sign the loan documents but if you are unaware of a covenant and fail to abide by it then you have defaulted on the terms of the loan and are in default. Be certain to understand all aspects of a loan document prior to signing it.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

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Thursday, November 2, 2017

What other questions should I ask a potential lender about my commercial loan in Texas through the SBA?

So you have decided that obtaining a loan from the Small Business Administration is a route that you would like to take. And you have also determined that your small business is eligible, according to their guidelines. Here is what you need to do to prepare for an SBA commercial loan in Texas.

What strategies can I use to ensure the highest degree of success with my commercial loan in Texas?

Because of this, however, lenders are the ones to set the interest rate and it might vary from lender to lender. While this can be confusing, if a borrower is organized and detailed oriented, this will not be a problem.

What if I still don’t know if I am eligible to receive a commercial loan from the SBA for my business ventures in Texas?

Monday, October 30, 2017

While there are many sources of commercial loans in booming economies, like that of Texas, many small business owners often turn to the Small Business Administration (SBA) for their lending needs. Even though many small business owners find lots of helps with the SBA, there is a lot to the process.

How can I use the benefits to my advantage if I am looking for a commercial loan to expand my business in Texas?

Sunday, October 15, 2017

When you determine that you are ready to obtain a loan for your company, it’s important that you do your research in all areas. One of the most important things to do it find a commercial lender that you feel confident will get the best loan terms for you.

Pretend you are interviewing an employee when you meet with a lender

Take heed: not every commercial lender will handle your loan application in the same way.

Tuesday, October 10, 2017

C-loans claims there are 12 distinct commercial mortgages. The following article groups these 12 types under three categories, permanent, equity and short term commercial loans.

Commercial mortgages differ from residential mortgages mainly in the variety of short term loan options avalable.

Construction lenders often require borrowers to take out unique and sometimes very costly commercial mortgages before any loan is approved, known as take out commitment loans.

Monday, October 9, 2017

In order to get the best rates and terms for your commercial loan, you are going to have to negotiate with commercial lenders. However, there are strategies that you can use to enhance your chances of successfully getting the terms that you want.

These sound like great strategies for negotiating with commercial lenders, so what could possibly go wrong?

Sunday, October 8, 2017

When you venture out to seek funding for a commercial real estate project, the number of options can appear to be daunting. But which one is best for you? And is there really any difference between one commercial lender and any other?

With all of the different types of loan and qualifications, how do I know which type of commercial lender is best for me?

Sunday, September 24, 2017

No one every takes out a loan and plans on failing to make the payments. But bad things can and do happen so you should always understand the default provisions for commercial loans that you sign.

Beware of Cross Default Clauses

Beware of Operational Covenants