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A commercial lender provides services to businesses, especially loans for items such as business equipment, investment property, and inventory. Commercial loans are backed by collateral. The collateral can be real estate, inventory, and a variety of other assets.
At HSH Associates Financial Publishers website, a complete listing of all commercial lenders throughout the United States can be accessed. This information includes names, locations, and in most cases a direct link to that particular lender for further information.
Commercial loans differ from most types of loans because each application is evaluated on a case by case basis. The person requesting the loan has to sell the lender on the fact that they endeavor will be profitable. However, every commercial loan is reviewed for credit worthiness, the value of the collateral, debt ratio, and property analysis.
Two debt ratios are used to analyze the personal budget of a loan applicant, top debt ratio and bottom debt ratio. Top debt ratio is the persons monthly housing expenses divided by their gross income. Bottom debt ratio is total housing expenses + debt payments divided by gross income. Top debt ratio should not be more than 25%; bottom debt ratio should not be more than 33 1/3%. If the ratios are more, the loan will either by denied or approved with a higher interest rate.
For small businesses, you might consider looking into a loan from the Small Business Association. The have Small Business Development Centers throughout the United States. The centers will assist you with all the paper work and answer all of your questions at no cost. After all the documentation is submitted, you will have an answer within 10 working days. Generally, you will have a slightly higher interest rate, but it will be worth it if you qualify under their guidelines.
Investing in commercial property or small business is an exciting venture. Understand commercial lending issues and basic requirements will help you get the best financing for your endeavors. The Small Business Development Centers offer you excellent service including financial counseling at no charge. You can find a center near you by logging onto their website.
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Know what you have.
Commercial real estate in some respects is not too different from residential real estate when speaking with owners of properties. In their hearts and minds their property is far better and far more valuable than that of their competition. Once you detach yourself from the emotional aspect, you can objectively look at the property.
You can list property types into two general groupings. Group A-standard commerical or general property types and Group B – Special purpose or use property types.
Standard or general use refers to any property that has a multi-use capability associated with it. The property can be used for nearly all commercial purposes and can easily accommodate a multitude of business types with little or no modifications. This type of property has a higher resale demand and has a shorter marketing time.
Special use refers to property types that have very limit use capability and have a very limited market to which reduces the demand and greatly increases the marketing time. Additionally, conversion costs can often times be greater than the value of the property in its current use.
Examples of each type:
Standard or General:
Warehouse
Office/Office Condo/Office – warehouse
Mixed use w/office or residential
Light manufacturing, Light Industrial
Medical and Dental offices
Retail/strip malls
Multi – Family (5+ units)
Mini-Mart
Single Tenant Properties
Special Use/Special Purpose:
Automotive Service/Repair
Assisted Living Facilities
Hospitals
Grocery/Markets
Single Tenant Properties
Mini-storage / Self-storage
Car Wash (Self -serve/Coin Op or Full Serve)
Funeral Homes
Restaurants
Hospitality (motel/hotel)
Bowling Alleys
Sport Arenas
Properties w/excess land
Churches
Educational Centers/Day Care
Board and Care Facilities
RV Parks
Mobil Home Parks
Heavy Industrial/Heavy Manufacturing
Golf Courses
Underwriting and risk pricing differences
The more common (general) the type of property and use, the better the financing and the more lenient the underwriting is to make these properties more attractive for investors and owners.
On the the other hand, the more off beat and further from the ‘bulls eye’ the tougher the underwriting and the more expensive the financing will be.
IMPROVING YOUR ODDS–KEY POINTS
Borrowers with strong credit and healthy balance sheets that include high net worth are easiest to close.–Helping yourself or your client to look better on paper is first and foremost (must be verifiable).
Having more than the minimum downpayment or equity postion in the property
Having liquid reserves equal to or greater than the loan amount
Strong long term tenants with long term leases
Having regionally or nationally credit rated tenants
If tenant is not credit rated, be ready to have tenant supply their financials to prove to lender tenant is financially healthy and can afford to rent your property.
If seeking cash out–keep amount reasonable and be prepared to identify in detail how the cash is going to be utilized and improve the borrower’s position
Seek financing within your means
At CFR Mortgage Group, Inc. we have extensive knowledge in dealing with getting loans closed on all property types. You can call us at 714-731-5282, email us at: cfrgroup@att.net or visit our web site: www.mycommerciallendingpro.com for more on lending programs and products.
Gregg Cochran is the SVP Wholesale Commercial Lending Unit of CFR Mortgage Group, Inc. in Southern California. CFR Lends in 44 states and has been in business since 1979. Mr. Cochran has been with the company since 1992. Mr. Cochran can be reached at 714-731-5282 or via email at cfrgroup@att.net