Learn To Be A Fix & Flip Investor

Sunday, September 24, 2017

Secrets of Texas Commercial Lending : What is Hard Money?

This is a term that is often thrown around in Texas Commercial Lending circles. If you plan on seeking out loans to help your business grow, this is an essential term to have a grasp on before getting in over your head.

Attempting to find a Texas Commercial Loans through traditional vendors is not the only gig in town. Many small business owners simply quit if the bank tells them that they are not eligible for a loan. This might be because they have not been in business for long enough, don’t have enough personal equity or cannot assemble the necessary assets to qualify.

But all is not lost if you have been turned down by a traditional lender. Hard money is a solution that has the potential to bring your small business to the next level, if used wisely.

So what is hard money? Essentially, hard money is a loan from a non-traditional loan from a private investor. These loans are typically backed by some sort of trust against the value of the property. It is not just an easy hand out for the borrower, however, as hard money also usually requires some sort of equity or collateral that is put forward by the borrower. In Texas Commercial Lending, the assets that are put forward serve as the security for repayment.

One of the biggest appeals of hard money is the speed at which it can be acquired. While it does not happen overnight, it is significantly quicker than a traditional loan. One of the main reasons for this is the presence of collateral and equity. While typical lenders often require extensive paperwork and a negotiation of terms, hard money lenders do not have that far-reaching process. This cuts the timeline down from months to weeks, or even days.

Lenders who specialize in hard money don’t care about the laundry list of items that traditional lenders must wade through in order to reach a decision. They are simply interested in providing short term loans that are secured by assets. In Texas Commercial Lending, they know that if the loan is not repaid as agreed upon that they have the right to seize the assets that were put down as security.

Nevertheless, this does not come without a price as hard money loans usually have a much shorter term for being paid. This can work to the benefit of the business owner, however, as the loan will be off the books and taken care in a short period of time. Hard money loans also typically have interest rates than traditional loans.

So what are the benefits of hard money in Texas Commercial Lending?

Hard money allows small business owners to quickly act on a potential business opportunity that they might otherwise miss due to lack of current capital. Because they are designed for the short term, hard money loans can easily infuse your business with cash flow to move to the next level. It is also a good solution for small businesses that do not have a track record necessary for a traditional loan, meaning those that have not been in business for very long. In Texas Commercial Lending , hard money can be very helpful to a small business that is looking to quickly expand.

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

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

How to Evaluate Potential Lenders for Commercial Loans

Any time that you are entering into a business deal it is important to know who you are doing business with. That is never more important than when you are seeking commercial loans.
One of the most important questions that you can ask a potential lender is how quickly they process commercial loans. Many times a great business deal has only a very short window of opportunity. So you will want to understand how long it is going to take your lender to process your request and your documents. This is also a good time to verify exactly which documents the lender requires so that you can be well prepared when you begin the application process. If the time frame for approval sounds too long then you might also want to ask if there is any way to expedite the process.
Another critical factor to selecting a lender is the fee structure for their commercial loans. Most lenders will advertise their interest rate very clearly but there can be a lot of other fees that will be added into the cost of your loan. You need to know what those fees are for and how much they will cost you so that you can determine the full cost of the loan from each lender. You might be required to pay an application fee up front to cover the administrative costs of reviewing your documentation. This is a nonrefundable fee and does not guarantee that you will be approved for the loan. In addition you will most likely need to pay appraisal fees, a survey fee, legal fees and a loan origination fee. Some of these fees could be rolled into the loan or they could be due at the closing. It is best to ask for a full fee schedule to know exactly what you are expected to pay and when.
Get to Know the Lender
You will also want to do some research on the lender. It is helpful to know if they write many commercial loans. This can help you to decide if you are willing to pay the nonrefundable fees knowing that the chance for approval might be very small. You will also want to decide how comfortable you feel working with the lender and the employees there. In some rare cases you might need to work with them due to an unforeseen issue. In these cases, such as a slow month of business or damage and inability to conduct business for a short time, you will want to know who you will need to speak with and how they could assist you.
Questions for a Potential Lender
When you are speaking to potential lenders, this is your opportunity to interview them as well as their chance to interview you. Having a few questions prepared to ask all of the potential lenders will help you to have a means of comparing and contrasting their services and features. Asking about fees and if they have the ability to waive any of the fees will tell you how eager they are to get your business. Asking who will be your main point of contact will also help you to determine if you would be working with the local office or if you will need to communicate via email or a phone call. And asking what their policy is for assisting you with issues will help you to evaluate their customer service. All of these factors could be very important to you over the term of your loan.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Tips for Getting Commercial Real Estate Loans

Commercial real estate loans are not as easy to acquire as you might think. But using a few tips can insure that you get approved and get a great rate.
You would think that lenders would be eager to grant commercial real estate loans due to the large dollar amount and the potential to make a great deal on interest. But in most cases, it is tougher than you would expect to complete the application process and qualify for the loan. But using a few proven tips can help to eliminate much of the pain associated with the process.
The first step that you need to take even before you have found the property that you are buying is getting your application packet in order. You will want to have this task done before you really begin to shop for a property because the preparation can take some time and you don’t want to lose out on a great property while you are digging through paperwork. You will need current financials as well as a few years of historical financials, tax returns for the past 3-5 years, rental schedules, leases, copies of sales contracts and AR statements, bank statements and asset and liability statements. Having these documents in order will help to expedite the application process for any commercial real estate loans.
Once you have found the property that you want, be sure that you do the research and know what the actual market value of the property is. This could be different than the asking price but understand that the lender is only interested in the market value. That is the value that the property will hold as collateral on the loan that you are asking for and that is what the lender is really interested in. Also understand that you will be required to make a down payment of around 30% of the market value. If you are willing to pay more than market value for the property then you will also need to pay the seller the delta between the market value and the asking price.
Prepare a Structure Diagram and Asset and Liability Statement
Having a complete structure diagram will help to save valuable time when the lender is evaluating your business. It gives them a clear picture of your business, what you do and how you accomplish it. This can save many weeks of questions when they are trying to evaluate your creditworthiness and the overall stability of your business. The asset and liability statement will be the document which will explain your financial stability in a nut shell. These two documents can greatly simplify the lenders discovery process prior to approving your loan.
Hire a Professional
Most business owners have no idea how much documentation is required to apply for commercial real estate loans. And once they begin the process they quickly become overwhelmed. You hire a lawyer to handle legal matters and an IT professional to design your network so it only makes sense to hire a professional broker to assist you with purchasing a property. It will not only eliminate much of the stress but it can also eliminate a lot of time that would be wasted resubmitting your application packet if there are errors or missing documents.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

4 Tips for Getting Commercial Loans

Applying for commercial loans can be intimidating to say the least. But using these four tips can help to ensure the success of your loan application.
The process of securing commercial loans can be daunting. And for that reason it is critical that you be well prepared when you are getting ready to submit an application. The credit history of your business and possibly your personal credit history will be under scrutiny during the application process so be sure that you have everything in order on both credit reports. Verify that both credit reports are accurate and that you have no issues that appear on either the personal or business report. Also be sure that you have copies of your business and personal taxes for the past 3-5 years, your current bank statements, a current asset and liability statement and any lease or rental agreements ready to submit.
When you are preparing your request you will want to be sure to provide information to the lender about your business, the industry and the reason you are requesting the loan. In many cases your business plan will have outlines the projected growth of your business and this can help to explain your current position and how the loan is going to help your business grow. Think of your loan application as an introduction to you and your business. Be sure to make a good first impression on the lender.
Local banks are a great place to start your search for commercial loans. If your business is small or has not been profitable for the past three years then you are far less likely to be approved by a national lender. But a local bank will be more willing to learn about your business and consider taking a risk on you. Also speak to the local Small Business Administration office to learn which lenders might best suit your needs. The process of working through the SBA and a local lender might take longer but it could greatly improve your chances for a loan if you are willing to invest the time.
Look for Alternative Financing Options
Many small businesses are turning to alternative lenders to provide their commercial loans. These lenders have less strict requirements and that makes it much easier for a smaller or newer business to get approved. But be aware that along with the lower requirements comes greater risk for the lender. As a result, you might be faced with a higher interest rate or higher fee structure for your loan.
Have a Well Thought Out Plan
When you are requesting a loan you need to be ready to provide all of the information and documentation that the lender requests. Having the material ready shows the lender that you have invested your time and effort into planning and preparing for the process. It also demonstrates the responsibility that the lender wants to see when thinking about how you run your business and how you will make the payments on the loan. Making a strong and professional first impression will be a great way to start the relationship with your new lender.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Advice about Getting Commercial Real Estate Loans

Most business owners are not very familiar with the process of getting commercial real estate loans. But these pieces of advice can help you to manage your expectations and succeed when you are ready to apply for a loan.
When you find a great commercial property that you want to buy time becomes a huge factor in everything that you do. Your first question to most lenders is about how quickly they can get your application processed and get you the money that you are requesting. Tip number one is that the standard answer in the commercial real estate loans industry is 30-45 days to complete the process. But the truth is that in most cases it takes more like 60-90 days to get through the process. Some of that could be due to ill prepared borrowers who are missing documents and information on the application but part of it is also going to fall back on the lender and their processes. So be prepared to spend several months ironing out the processed of completing commercial real estate loans.
Rule number two is to keep your options open. You never want to rely on just a single resource for anything in your business and commercial real estate loans are no different. You need to have a backup plan for several reasons. In some cases the lender might have very strict qualifications that you might not meet. Another issue could be the time that it takes for a lender to process your application. And even after you have applied and been approved, you might find that you are not in favor of some of the terms that the lender has in their contract. Having several options allows you to carefully evaluate your options and make a selection that is best for you and not just for the lender.
Tip three is one that can save you some money. Don’t get talked into requesting an appraisal on a property yourself. If you think that it is going to save you time and money, you are wrong. You can’t submit an appraisal to multiple lenders and save money. By law the bank must request their own appraisal and they must also have an environmental study completed on the property.
Start Small but Don’t Be Afraid to Go Big
Starting with local banks and your local Small Business Administration office is smart. Local banks and smaller lenders are often willing to work very hard to beat out the competition for your business. But don’t forget to check out your options with some of the big lenders. Different lenders have different criteria for loan qualification as do lenders of different sizes.
Think Outside the Box
If your first application or two gets turned down, don’t give up. There are many different types of lenders out there. You might need to look into alternative lending options to start with and move to a more conventional lender in a few years. But take the knowledge and experience you have gained on the first few applications and keep looking for your perfect lender.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Three Factors to Consider When Evaluating Commercial Loans

Commercial loans are a great way to help to grow your business but there are a few facts that you need to be sure to understand. Knowing exactly what it will cost you to borrow money is an important factor in deciding if you are making a wise business decision.
Whenever you are considering commercial loans, there are a few factors that you need to take into consideration. It can be very easy to research the process of applying for the loan and all of the requirements so that you have a good knowledge base. But then as you slog through the application process, it can become very stressful. You are supplying years of data and financial information simply to prove your creditworthiness and the character of the business. And the longer you wait the more you begin to worry that you will not get approved. So when the approval does finally come through, you are tempted to quickly sign the documents to get the loan. But you need to carefully evaluate the entire offer and terms.
Knowing if you are being offered a fixed rate loan or a variable rate is important for your future financial planning. The fixed rate will offer you a stable and consistent payment for the life of the loan. A variable rate loan will fluctuate as the market changes and can be very difficult to work into your budget if you have limited funds. The variable rate does offer the potential to save on your interest rate if the rate drops but it also hold the potential for an increase in your costs if the rate goes up. You need to understand and accept the potential risk if you are opting for a variable interest rate.
You also need to look very closely at the interest rate that you are going to be paying. Is it at or near the average rate that you were expecting? If there is a discrepancy then you need to speak to the lender to learn why. The rate should be determined based on the business’s current financial condition and stability as well as cash reserves and equity in other property or equipment. A rate change of even one or two points can be a large sum of money over the course of your loan.
Understanding the Fees
There are many fees that you might need to prepay on commercial loans. This can include a loan origination fee or a processing fee, legal fees to cover the contract creating by the lender and also fees for surveys and appraisals of any property involved in the loan. The most important part of this is that these fees in no way guarantee that you will be getting a loan. So you need to be willing to pay the administrative fees even before you submit your documentation.
Be Prepared
The best way to insure that you are not wasting any money is to be prepared. You need to understand the fee structure and also the requirements to qualify for the loan. Once you know that you will qualify then you can move forward feeling secure about your financial position and your ability to get the commercial loan that you are requesting.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

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Sunday, September 24, 2017

Secrets of Texas Commercial Lending : What is Hard Money?

This is a term that is often thrown around in Texas Commercial Lending circles. If you plan on seeking out loans to help your business grow, this is an essential term to have a grasp on before getting in over your head.

So what are the benefits of hard money in Texas Commercial Lending?

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.

Beware of Cross Default Clauses

Beware of Operational Covenants

How to Evaluate Potential Lenders for Commercial Loans

Any time that you are entering into a business deal it is important to know who you are doing business with. That is never more important than when you are seeking commercial loans.

Get to Know the Lender

Questions for a Potential Lender

Tips for Getting Commercial Real Estate Loans

Commercial real estate loans are not as easy to acquire as you might think. But using a few tips can insure that you get approved and get a great rate.

Prepare a Structure Diagram and Asset and Liability Statement

Hire a Professional

4 Tips for Getting Commercial Loans

Applying for commercial loans can be intimidating to say the least. But using these four tips can help to ensure the success of your loan application.

Look for Alternative Financing Options

Have a Well Thought Out Plan

Advice about Getting Commercial Real Estate Loans

Most business owners are not very familiar with the process of getting commercial real estate loans. But these pieces of advice can help you to manage your expectations and succeed when you are ready to apply for a loan.

Start Small but Don’t Be Afraid to Go Big

Think Outside the Box

Three Factors to Consider When Evaluating Commercial Loans

Commercial loans are a great way to help to grow your business but there are a few facts that you need to be sure to understand. Knowing exactly what it will cost you to borrow money is an important factor in deciding if you are making a wise business decision.

Understanding the Fees

Be Prepared

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