|
Loan Type |
Description of Loan |
|
SBA 504 Loan |
Provides long-term,
fixed-rate financing to small businesses to acquire real
estate or machinery or equipment for expansion or
modernization. Typically a 504 project includes a loan
secured from a private-sector lender with a senior lien, a
loan secured from a CDC (funded by a 100 percent
SBA-guaranteed debenture) with a junior lien covering up
to 40 percent of the total cost, and a contribution of at
least 10 percent equity from the borrower. The maximum SBA
debenture generally is $1 million (and up to $1.3 million
in some cases). |
Adjustable
Commercial
Mortgage |
A commercial loan in which
the interest rate is
adjusted periodically to a specific index such as
Prime or T-Bills. |
|
Construction Loan and Take-out |
A commercial construction loan
tied in with a
pre-arranged takeout loan in place. |
| Fixed Rate
Commercial Mortgage |
An interest rate that
remains constant throughout the term or the commercial
mortgage. |
| Hard Money
Loan |
Commercial loans from private lenders
based primarily on the property value. |
| Bridge
Loan |
A short term, interim or
project type commercial loan. Usually 2 years or less. |
| Joint
Venture |
A financial partner who
has a financial interest in the development or ownership
of the property. |
| Sale-Leaseback |
Lender purchases land and
leases back to borrower for a fixed rent plus other
considerations. This type of commercial mortgage can produce more dollars than a
typical commercial mortgage
depending on strength of the borrower. |
| Second
Mortgage |
A commercial loan secured by equity,
but behind that of the first lien. |
| Wraparound
Mortgage |
Lender makes a second
mortgage and assumes the first mortgage. |
General Lending Criteria:
-
Banks will usually not finance
more than 75% of the appraised value of the property. A SBA
504 loan requires a 10% down payment from the borrower.
-
Properties must show sufficient debt-repayment ability
by way of a debt coverage ratio of 1:20X or higher on
income.
-
In cases where the property is occupied by a single
tenant, the lender will want to see the financial
strength of the tenant.
-
You will need to provide an updated rent roll to the
lender, which might be required to be updated yearly.
-
The lender will most likely require an environmental
phase-I audit to discover any possible contamination of the
site.
-
Personal guaranties of the principal owners will
probably be necessary.
Lending Directories and
Sources:
C-Loans - Five hundred commercial lenders await your
application. These
are direct commercial lenders, not brokers, so you deal
directly with the lender.
Commercial
Real Estate Loans - Pacific Security Capital provides
commercial real estate loans, equity and structured finance in
amounts of $2MM or more.
FinanceSuite on the Web - Business Loans,
Equipment Leasing and Commercial Real
Estate Loans.
Steelhead
Capital - Customized apartment and commercial financing
solutions for commercial real estate investors nationwide.
BusinessFinance - Search the funding criteria of over
4,000 sources for business loans, venture capital, equipment
leasing and commercial real estate financing.
The Bottom Line:
A local expert with local
knowledge and expertise on your side to assist you
in purchasing office space and finding financing will ensure you find the
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guarantee you avoid costly mistakes.
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