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Archive for the ‘Commercial & Business Lending’ Category

Yes, lenders are actually lending money for truckers to get themselves a truck. It’s getting tougher though. Have you tried and weren’t able to do it? Don’t give up because there are options.

Obviously, if you have good credit (675 or higher with no major derogatory items), a 2-3 year + track record of being in business, and decent financials, then securing credit to get a truck should be pretty easy. You’ll have more choices in terms of where you can get funding.

If you are starting a new business and have lower credit scores, it’s going to be tougher. This is the sector of trucking that lenders are really beginning to shy away from. IF YOU are willing to be a little more flexible, your dream of starting your own trucking & hauling company may not be dead. You can still create a better life for you and your family.

Here is one way that has enabled many new truckers to secure financing for their trucks to start their new business. Buy a truck from bank inventory. That’s right, if you make a slight concession & buy a bank owned truck, then some banks make financing concessions to you and will lend you money to get your truck even if:

o Your Trans Union credit score is as low as 600 & if you’ve had a recent bankruptcy.
o You’re a brand new business.
o You don’t have a down payment (normally just one payment due up-front).

If you’ve always wanted to start a trucking company, you can still do it. If you’re willing to make concessions and drive a bank owned truck, you may be able to get funding to get you and your business on the road.

The economy is weak and commercial mortgage capital is tight. Investors and developer who want to secure funding must find sectors of the industry that are thriving or risk being rejected by lenders. Fortunately, there are some pockets in the commercial real estate space that still offer significant growth opportunities and can still capture the interest of banks, private commercial mortgage lenders and other capital partners. Boomer housing is booming and is projected to maintain a rapid growth rate.

Student housing, for what’s known as “echo boomers” and senior housing, for rapidly aging “baby boomers”, are huge growth drivers in the multi-family (rental) sector. Amid all the doom and gloom these two housing areas offer investors and developers real profit opportunities.

College enrollment has been rising for several years now and will continue to grow. A weak job market can actually help improve this trend. When good paying jobs are hard-to-come-by and when people are being laid off, they often opt to go to school to improve their employment prospects for the future. Echo boomers, also-known-as Generation Y, number about 83 million. Demography speaking, that’s a huge number, and by 2030 it is projected that there will be more than 90 million kids that have been born in the first third of the new millennium. Of these young people who graduate from high-school nearly 70% will attend college. Add to that a large number of older Americans who will, no doubt, decide to continue or complete their education and you have a massive amount of students on the horizon. Schools typically only provide housing for about 35% of their students. The market for student apartments around higher education campuses is ripe for development. Lenders are very willing to listen to acquisition and development ideas in this fast growing sector.

The senior housing sector is also poised for a great increase in demand over the next 20 years. The last generation of seniors was staunchly opposed to moving into any type of “senior” housing facility. Their frame of reference was the “nursing home” where they perceived seniors were neglected and ill-treated. The baby boomers however are much more accepting of the senior housing concept than their parents were and they have more money and better health insurance that can buy better quality care. Ten years ago less than 5% of older American would consider any type of senior or assisted living housing concept; today close to 16% are very willing to look into it. The last U.S. census tells us that the number of senior citizens will reach nearly 73 million in less than 25 years, that’s more than double today’s figure. Life expectancies are increasing rapidly; we can expect that one in five Americans will be over 65 by the year 2030. A rising number of seniors plus a rising market acceptance equals a monstrous increase in demand for all types of senior housing now and well into the future.

Lenders, joint venture partners and private commercial real estate investors are being very, very selective when choosing the projects and acquisitions they fund today. Funding sources are attracted to growth markets and will back the purchase or construction well run, high quality projects in expanding sectors. Student and senior housing are definitely booming and should continue to rapidly enlarge. Commercial real estate professionals who need financing should carefully consider entering or increasing their exposure to these markets.

“At the top of the real estate market, the cap rates of tertiary-market properties were similar to properties in primary and secondary markets.” (CCIM Institute) Coupled with the fact that Balance Sheet Lenders, i.e., institutions that lend per the Balance-Sheet, aka, Portfolio Lenders, are filling the void left by the dearth of solvent secondary Commercial Mortgage Backed Securities (CMBS) markets, it may be time to take another look at investing in smaller commercial property markets, because local lenders know their towns and real estate values are dropping in tertiary markets, too.

Note: “Smaller banks also have higher capital reserve requirements than larger rivals, which left them ‘operating on better capital cushions going into this downturn,’” said Jay Brinkmann, chief economist for the Mortgage Bankers Association (“From Smaller Mortgage Lenders See Opportunity in Turmoil,” Wall Street Journal, Dec. 2, 2008).

As you know, Balance Sheet or Portfolio Lenders are conservative, “old-fashioned” lenders, common both with life insurance businesses and with regional savings and loan institutions, like you find in Bozeman, Montana. With this old “norm” returning, meaning retaining debt on your own books and not repackaging the debt into securities which are then sold off, “a number of the balance-sheet lenders are also using secondary markets as opportunities to stand out and diversify their offerings,” (CCIM Institute) which means it may be the time to consider securing your loan at the local level in not just the secondary markets but also in the tertiary

Trepp, commercial research provider found that defaults in commercial mortgage securities (CMS) has jumped 85 basis points by the end of November 2009.

The Mortgage Bankers Association’s Delinquency Report is showing the 30-plus-day delinquency rates on CMS loans are also rising.

“What we are seeing now is a recipe for disaster in the commercial real estate market for 2010,” said Ulysses Sanchez, Real Estate Commercial Group, a commercial loan restructuring company. “A large number of balloon loan payments for commercial property loans are coming due in 2010 and 2011. In the residential arena we know pay option arms are also due to recast in 2010. The vacancy rates are at high levels for multi-family, the unemployment soaring and commercial property values plummeting, commercial property owners are not going to be able to service their debt without serious commercial loan workouts of their loans and business. Property owners need to prepare now in order to avoid default.”

According to government officials, the US has about $300 billion in negative equity overhang what will need to be refinanced in the next two years. Refinancing is a big fat if, that is if the Banks are lending of course. The numbers will only continue to increase as approximately $2 trillion or more in commercial mortgages are expected to come due for payment within the next five years.

If you are a business owner seeking help for a commercial loan workout or commercial loan modification, be careful. As many companies populated the residential marketplace, the same is happening in the commercial sector. Just Google “commercial loan modification” and you will see for yourself the proliferation of the so called business opportunity as they are being touted by so called “experts or affiliated with a attorney. The problem becomes that legitimate organization like Real Estate Commercial Group that have the expertise and wherewithal to develop a responsible and well laid out commercial loan workout that is acceptable to the lender and client are being squeezed out by the “pretenders” of the industry.

Eventually these pretenders or affiliate attorney companies will get the attention of the attorney generals of their respective states. For example in Florida Attorney General announced yesterday he has filed a lawsuit against three business and their principles and affiliated attorneys on allegations of deception practices regarding their involvement in residential foreclosure scam.

“if you are a business owner facing a financial hardship, don’t wait do something call us at 1-877-793-2339 x 2310, we are not attorneys, we are bankers. If we need a attorney, its for a Chapter 11 “, said Ulysses Sanchez, Commercial Loan Modification

The period of regular commercial lending goes from 3 to 15 years, depending on the value of the loan. The interest rates will be set on the basis of the length of the loan. Once the loan has reached maturity, the owner needs to pay the remaining funds to the bank or commercial lending entity. If the owner does not have the money, the bank will decide to extend or refinance the loan otherwise the borrower will need to sell the property.

You will find commercial lending options that offer fixed rates and those that offer adjustable ones. When you opt for the adjustable rates, you will pay a proportion of interest rates in relation to the current year and the previous one. There is one where you can have both fixed rates and adjustable ones. A part of the loan will be under fixed rates and the rest will have adjustable fees.

Mortgage credit institutions have learned much from the recession that we are suffering, therefore they may need to study requests more thoroughly than they would have done it before. Most commercial lending institutions will need to make sure that your business does not pose them any important risks. They all have their standards and criteria that requests have to meet, however taxes and fees may change between state to state. Your case has to be stated clearly because the paperwork you present will paint them a picture of who you are.

There are different types of commercial property.

All businesses need commercial lending at any point in their life cycle. If you are looking for a loan, let us now present you with a few options of commercial lending you should think about.

Mortgage Lenders determine their commercial financing needs, analyzing the risk factors of your business. The rental apartment or local lending is less risky for commercial lenders. One should consider that interest rates no longer apply in a rental, however it is still a wise business investment for many entrepreneurs.

The types of accommodations may include a single tenant, rent for students, family apartments, and for good and half luxury. The rental offices are another popular source of financing for commercial firms. This could be of great help to meet the needs of manufacturing companies, warehouses and distribution sites, storage units, or for other special purposes.

We are in the midst of the most challenging credit environment in a generation. Many lenders have closed their doors forever and virtually all have tightened their lending standards. Even borrowers with clean finances, good credit and healthy down payments are finding it difficult or impossible to get their projects funded. What a difference a year makes.

We’ve been living in an era of cheap money for a-long time now. Interest rates and marginal income tax rates both began to moderate and trend down as America and the Federal Reserve embraced the supply side of the economic equation. But cheap money does not, necessarily beget copious amounts of lending even if willing borrowers abound.

Look at our situation right now; rates are so low that when you factor in inflation money is practically free. There are plenty takers willing to invest in commercial property or undertake a new development project but the banks aren’t funding loans.

It is not the cost of money that matters, it’s the flow. The key to a vibrant credit market is liquidity. Most financial Institutions have no real interest in holding the loans they write.
They could hold on to their commercial mortgages and earn some interest but so what?

They could earn interest by buying Government bonds and Government bonds have no risk. Most financial institutions either sell or borrow against their mortgages so they can get more money to loan out again or to invest in other core business activities.

What has happened recently is that the secondary market for mortgages seized up. No one was willing to buy mortgages so, if banks wrote them they were facing the prospect of holding them and, thus, tying up their capital at substantial risk. They opted not to write them. No loan buyers in the market, no loans. It doesn’t matter how low rates go.

To facilitate the efficient buying and selling of mortgages Wall Street turned them into bonds. They took hundreds of loans at a time, of all different quality, bundled them and called them collateralized mortgage obligations (CMO). These CMOs were bought and sold and repackaged and borrowed against again and again, The CMOs included good mortgages and poor mortgages and even some dreaded “sub-prime” mortgages. Eventually, no one could figure out who owed what to whom and what actual property was backing what bond. Investors stopped buying. In very short order volume in the secondary mortgage market dropped by more than 80%. No loan buyers, no loans.

So what is a borrower to do? At my firm, MasterPlan Capital, I talk to borrowers every day. I can assure you they don’t care about the CMO market or how hard it is to find buyers for mortgage paper now-a-days. They want their deal funded as-soon-as possible credit crunch or no credit crunch.

I’m a commercial real estate investment banker; it’s my job to get my clients the money they need quickly, efficiently and on the best terms available. I had to find funding sources and investors who were un-phased by the credit market’s liquidity problems.

The answer should be obviously to professionals and borrowers alike; find lenders who don’t sell their loans.

A mortgage lender who holds the loans it originates is wholly unaffected by the fact that there are few buyers. He just doesn’t care. There is a name for these unique lending companies, there’re called “portfolio lenders”. They issue mortgage loans and they keep them in their portfolio, collecting interest over the life of the loan and receiving their principle back at maturity. Portfolio lenders have the freedom to be flexible and write loans they want to write rather than writing a loan that will be sure to appeal to a very discriminating debt purchaser. They close deals much faster and with less paperwork and less documentation than lenders dependant on the whims of the market. Portfolio lenders are still in the game while the big national banks, insurance companies and Wall Street sit on the sidelines and wait for the market to become liquid again.

I’ve been able to identify and establish relationships with quite-a-few portfolio lenders in several segments of the financial industry. By turning to this special group of money sources I’ve been able to secure approvals for clients who simply could not get financed through traditional outlets.

I’ve had great success with hedge funds, real estate investment trusts (REITs), and private lenders.

Hedge funds crave risk while others shun it. They pride themselves in being aggressive and having the ability to see the value in a deal when others can’t or won’t. These hedge funds are largely unregulated and can invest wherever they see fit. Best-of-all hedge funds are flush with cash. They have tons of money immediately available and can make decisions and close deals in just days. Once you have identified a fund that has a taste for real estate and a desire to make deals all you have to do is bring them what they want. And once you’ve made them money in a deal you’ll have a funding source for life.

REITs are similar to hedge funds in some respects but they are often publicly traded and thus lack the flexibility inherent in hedge funds. A REIT is a specialty company that must, by law, operate in the real estate sector and distribute substantially all of it’s income to it’s shareholders. Most REITs directly invest their assets in income producing real estate such as apartment buildings, retail centers, hotels or office buildings. But some are in the business of making loans. The trick is to find them and then to come to understand their lending criteria. By and large they are portfolio lenders so if your building or development project falls within their investment parameters you can close loans all day regardless of the credit environment.

Private lenders are individuals or privately owned business entities that seek high yields on their investment capital by lending it out against commercial real estate. Once called “hard money” lenders they are now main-stream and represent the fastest growing segment of real estate finance. There are literally hundreds of firms that hold themselves out as private lenders. The trick is knowing which ones will truly come through with the money on closing day. Working with a legitimate private lender can be extremely rewarding, they identify with property owners and investors and write loans based on the merits of the deal not a set of Government imposed guidelines. A good private lender on your team is like money in the bank. But, beware, a disreputable private lender can ruin your deal and your reputation.

When seeking financing for commercial real estate I suggest you start with a simple but important question. Ask the lender if they sell their loans or portfolio them. If they tell you they hold their loans for their own account in their own portfolio, you’ve found someone who can afford to ignore the credit crises and write you a check no matter what the market happens to be doing.