Commercial Lending
For most small business people, the only experience they have had with Mortgage lending is buying a home. While some of the principles apply, commercial lending is more complicated. Our niche is a hybrid between residential and commercial real estate loans. We can make a loan as small as $50,000 and as large as $5,000,000. We try to close in about 60 days, while the average in the industry is between 4 and 6 months.
Here are some FAQs that may help you.
Q. What kind of property do you lend on?
A. Almost anything except gas stations and other properties with environmental problems.
Q. What are your interest rates?
A. Here is the difference between a home loan and commercial lending. With home loans you either qualify or you don’t. Commercial properties are grouped into tiers and generally there is a different criterion depending on the tier. In addition, your financial credit scores and the amount of the loan relative to the value of the property LTV (loan to value) have an effect on the interest rate. Rates change almost daily so I can not give you an exact quote.
Q. What is DCR? (Debt Coverage Ratio)
A. The most used technique to value commercial property is the income approach. DCR is the ratio applied to the property’s NOI (Net Operating Income). The ratio usually runs between 1.2 and 1.6. Let’s say your business has an NOI of $85,000. $85,000 divided by 1.2 = $70,833 divided by 12 = $5,902.78. In other words the loan can not be serviced by a payment larger then $5902.78.
Q. What kind of costs is involved in getting a commercial loan?
A. You should budget at least 8 to 9 per cent of the loan you want for acquisition costs. There will be points, appraisal fees environmental reports, legal fees, escrow fees to name a few. WE REQUIRE A NON REFUNDABLE FEE OF $495.00 TO START A LOAN. However, if the loan closes, the deposit is credited against other fees at closing.
If you have other questions please call. There is no charge to have a preliminary conversation