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SBA

SBA, What's Closing Now

$2,600,000 – SBA Loan – Employee Buyout

Melbourne, FL

Our client spent his entire adult life working for a very successful restaurant in town, so when the owner was ready to sell – he stepped up to buy. The only challenge was that he wanted to finance the deal immediately following a period of time when restaurant properties took a big hit.

Despite pandemic cash-flow challenges in 2020, we were able to prove a pattern in the financials to show a continued future trend of growth for the business. That along with the buyer’s good credit, great experience, and some money down, this new restaurant owner will not only carry on the legacy, but will also do so using the cheapest money available with an SBA Loan – before rates go up for good!

If you’re motivated to take the next step towards ownership, give us a call. It is very important to consult with a professional that you trust not only to help you with the loan process, but to strategize and select the best money to suit your future. To get started on qualifying for your employee/partner buyout loan today, contact ComCapFL through our website or by calling us at (888) 959-1648. There’s no risk or obligation to explore your options!

Blog, Bridge Loan, Commercial Loan News, SBA

3 Pandemic-Proof Commercial Loans

Pandemic or not, businesses want to stay in business. Investors want to jump on rare investment opportunities — but how do they do that when the banks shut them out? The answer: they turn to private lenders.

But why are people so hesitant when it comes to private lenders?

Sure, banks have been around for a long time and have traditionally been seen as trustworthy, while private lenders may be seen as rogue lenders who make their own rules — but that isn’t necessarily a bad thing.

Private lenders aren’t loan sharks that are after your assets. They are established, reliable lenders that are looking to step up when the banks cannot… and these are especially such times. Dave Dambro, branch owner of Commercial Capital Ltd., FL, says, “The truth is, lenders don’t want your real estate. They don’t want your collateral. They’re in the business of giving money to get this much back in return. It’s that simple.”

Therefore, if you’re a borrower who is facing credit or cash flow challenges due to the effects of COVID-19 — but you have a strong business or commercial real estate asset to leverage for a loan — you still have several real options available when it comes to commercial financing — and they’re not available at your corner bank.

These commercial loan options, all from private lenders, include Hard Money, Bridge, and SBA loans.

Hard Money

Hard Money loan is a type of mortgage that is secured by real property, and is typically from private money lenders rather than banks. Hard money loans are non-recourse, and thus the borrower is not held personally liable in case of a default. This means that in the case of a default, the lender would only go after the collateral asset – which is, in our example, the commercial real estate – rather than going after the borrower’s personal assets.

Hard Money loans are COVID-proof for this simple reason: buildings DON’T GET SICK! Since these are short- term loans (typically less than 24 months) they operate on the expectation that the property won’t decrease in value significantly enough during the brief loan period. And also, while certain properties may become slightly less attractive (ie. office buildings, hotels, retail strips), the loan only lends at 50-70% LTV. Thus, the emergency sale of the collateral will still usually cover the loan in the case of a default.

Besides being non-recourse, there are some other COVID-friendly benefits to these loans: since they’re concerned with the collateral, they require less documentation from the borrower. This is especially beneficial for the borrower who has credit challenges or can’t qualify for a conventional loan through a bank. Can’t find an appraiser? This is not necessarily a problem! Sometimes, lenders themselves will determine the collateral’s market value — without an appraiser — if there is sufficient evidence of the property’s value.

Bridge Loans

As with a Hard Money loan, a Bridge Loan is a loan made of temporary funds that are based on the value of the real estate collateral’s value, with some emphasis based on the borrower’s creditworthiness. Also known as gap financinginterim financing, or swing loans, Bridge Loans “bridge” the gap during times when financing is needed but not yet available.

Both corporations and investors may use bridge loans, which can be customized by the lender for many different requirements. These requirements may include making improvements, renovations or repairs to CRE prior to securing a permanent loan, or obtaining financing prior to stabilizing a property and qualifying for better rates and terms.

Bridge loans are usually short-term averaging 12-24 months. Generally an interest-only monthly payment rather than an amortizing payment is required to service the debt at slightly higher interest rates than a permanent mortgage. (However, since the monthly payment is interest-only, the cost to service the debt may not be that much higher than a typical P&I monthly payment.) Bridge loans are backed by some form of collateral (primarily CRE), but may include business assets.

By using a bridge loan, borrowers may use the equity in their current commercial real estate as the down payment on the purchase of another investment property until securing a permanent financing solution.

Why are Bridge Loans COVID-proof? Similar to Hard Money loans, Bridge Loans are COVID-proof because they are short term and rely on collateral, which “doesn’t get sick.” However, Bridge Loan requirements include providing a statement with an exit strategy back to permanent funding. For example, “If you give me this money for 12-18 months, here’s how I will refinance back to permanent…” This exit strategy acts as a safety feature, reducing the risk of exposure for the lender. This is why, with an exit strategy, you can reap the benefits of a higher LTV and better rates on a Bridge Loan.

SBA Loans

SBA Loans help stable small businesses grow and expand. By meeting certain criteria, the Small Business Administration guarantees a portion of your loan, which lowers the loan’s risk – getting you the best commercial loan rates and terms available.

Due to the effects of the pandemic on the economy, it’s become harder for lenders to find stable businesses to fund — so the rates are lower than ever. However, if your business has survived the challenge, an SBA loan might give your business a unique and rare opportunity to grow, acquire, and expand. Use an SBA loan to finance new equipment for your medical office, or purchase another fulfillment warehouse for your growing e-commerce business. An SBA loan has so many uses!

Why are these loans COVID-Proof? SBA Loans are COVID-proof because the SBA’s role is to promote the strength of small businesses to support and grow the economy and job market, as well as provide relief such as EIDL’s for natural disasters and such. This means that it will always be in the government’s best interest to save small businesses in the case of a natural disaster, such as the COVID-19 pandemic. That is why, thanks to the CARES Act, Congress has allocated another round of additional funds for SBA guarantees — providing rare and excellent financing opportunities — in order to keep the economy moving forward. (For more information on the current SBA incentives, read our recent article here.)

In conclusion…

Pandemic aside, there is plenty of commercial money available. If your business or investment makes sense financially, then the next step is simply finding the right commercial loan specialist to nail down the right loan for your requirements. The professionals at Commercial Capital Ltd., FL (a direct private and bridge money lender) can assist you with their own funds, and additionally advise you on the entire picture of your loan options, including SBA, CMBS, and conventional options. If you or your business is looking for commercial financing and want to find the best options available, call us today at (888) 959-1648 or email them at info@comcapfl.com.

Blog, Commercial Loan News, SBA

New SBA Stimulus Promises Small Businesses Months of Free Money and MORE

*Amended on February 23, 2021 to reflect SBA’s Procedural Notice posted on February 16, 2021. Details constantly subject to change. For more information, visit the SBA’s website at www.sba.gov.

As things continue to rapidly evolve in commercial financing during COVID-19, one thing is for certain: small businesses need help more than ever. As it becomes more and more unlikely for a business to walk into their corner bank and secure a loan, private lenders and commercial loan brokers have assumed the role and are coming to the rescue – with the help of the SBA.

This week, the SBA announced its emergency enhancement plans to provide new stimulus for 2021 — and they’re coming in HOT and ready to help small business.

So, if you’re looking to acquire a business, start a franchise, purchase a building for your business, expand or even refinance – NOW is a better time than ever. Why?

Free Money.

That’s right. Unlike the SBA’s stimulus package from the last major recession (which also increased guarantee percentage and cancelled guarantee fees), the SBA has added in an extra bonus of paying THREE full months of principal and interest to the lender on the borrower’s behalf – up to $9,000 per month.

While we wait for the guidelines to officially come out, this are the details that we are hearing from the SBA on how this will actually work…*

For New SBA Loan Borrowers (Approved after Feb. 1, 2021)

  1. 3 Months of P&I Payments Made For You by the SBA

For all new SBA loans approved after February 1, 2021, the SBA will make three payments of principal and interest on the loan, paid to the lender, on the borrower’s behalf. These payments are good for all amounts up to $9,000 per month. In addition, the borrower does not need to apply for this relief, as it will be automatically applied to for them, by the lender.

  1. Waiving of Guarantee Fees

In addition to the three free payments, the SBA will also waive SBA Guarantee Fees on all new SBA 7(a), 504, and Micro-loans that are approved starting February 1, 2021. These SBA guarantee fees are paid by the borrower, and are usually around 2-3% of the guaranteed portion of the loan. For example, here are some common amount guarantee fees:

  • $1mm loan = $26k fee waived
  • $3mm loan= $82k waived
  • $5mm loan = $138k fee waived
  1. Increase of Guarantee Percentages for SBA 7(a) Loans

The SBA is also changing the guarantee percentage of its 7(a) loans. These guarantees provide insurance to the lender in case the borrower is unable to repay the loan. In such a case, the SBA would cover the loan payment amount to the lender, thus mitigating the lender’s risk in taking the loan.

While this has no real effect on the borrower, it has major implications for the lenders: it encourages them to fund loans that they wouldn’t have otherwise funded. (Thus, if you were on the cusp, now would be a good time to go back to your lender and try again!) Typically, this guarantee percentage is 75-85%, but thanks to the new guidelines, that guarantee percentage will go up to 90% (or even 100% on loans with commercial real estate!)

With all of these new bonuses, a new $5 million SBA loan will save approximately $135,000 in payments and fees! However, there is a deadline: to qualify, your loan must be approved before September 30, 2021. So borrowers — make sure to apply prior to August, as we will surely see the system bottleneck as it comes to a close…

Who is encouraged to apply?

If you’re looking to purchase, grow or expand your business and require between $500,000 to $5 million, an SBA loan might be for you. SBA Loans cover these requirements:

  • Owner-occupied Commercial Real Estate Purchase or Refinance
  • Debt Refinance
  • Business Acquisitions
  • Partner Buyout
  • Expansion
  • Start-up Franchise
  • Machinery/equipment Purchase

This applies across most industries, even covering hospitality that has bounced back during the pandemic. Unfortunately, this leaves out specific businesses and property types such as gas stations, mobile home parks, and ground-up construction.

Pre-Approval Checklist: What You’ll Need

The SBA loan application and approval process has never been described as “quick and easy” (most SBA loans take about 30-90 days to close), but you can make the process easier for both you and the lender by having these documents prepared ahead of time:

Business Documents

  • 3 Years business tax returns
  • Interim Financials (P&L statement and balance sheet – no more than 60 days old)
  • Month-by-Month Financials (may be required for businesses impacted by the pandemic)
  • Business Debt Schedule

Personal Documents (for any owner with a 20%+ stake in the company)

  • 3 Years of Personal Tax Returns
  • Updated Credit Score (make sure to double check this!)
  • Personal Financial Statement
  • Resumé (for acquisitions and startups)

And as always, when looking to obtain commercial financing, we advise that all borrowers and business owners keep their big-ticket purchases to a minimum! While a new house or fancy car might be selling at a price that you feel you can’t miss out on, you’ll really kick yourself if it ends up making you miss out on these killer loans!

Where to Apply for a New SBA Loan

Although traditionally, a business’s first instinct is to ask their local bank for a loan, that is no longer a viable option — especially for SBA loans. In order to obtain an SBA loan, you’ll want to apply for a loan with an SBA Preferred Lending Partner, or PLP. However, not all PLP’s fund the same SBA loans, and some only fund specific industries or commercial real estate property types. Your best move, to save time and find the best lender for your loan requirements, is to consult with a Commercial Loan Specialist who can help you examine several different lenders at once. These commercial loan specialists leverage their relationships with PLP’s and behave like a partner to you, the borrower — advocating for you from application to approval to close.

If you’re interested in applying for a new SBA loan today, we encourage you to reach out to our specialists at Commercial Capital Ltd., FL (ComCapFL) and find out how we can help you find the best options for you and your business.

Additional Resources:

Blog, Commercial Loan News, Commercial Real Estate, SBA

5 Loan Document Tips for Commercial Borrowers During COVID-19

Due to the economic impact of COVID-19, commercial underwriting has become more conservative than ever. While the experience is unlike the financial crisis of 2007, which affected the availability of commercial loans — we are seeing a change in the amount of risk a lender is now willing to take on as a result of COVID-19’s other economic effects. This is good news: it means that there is still plenty of commercial money available! However, the parameters that must be met to get funded have dramatically changed.

As we move into 2021, it is expected that cautious underwriting to continue as an industry-wide trend. Thus, borrowers will have to provide more documentation than ever to qualify for commercial loans. Before applying for your next commercial loan, take a few minutes to review our checklist for how to best prepare or the underwriting process. Proper preparation will not only save you time down the road, but may also be a make-or-break in securing the best loan terms in the near future.

Loan Doc Tips 2021

Tip #1: Provide Extra Income Verification

The effects of COVID-19 may have had a significant impact on the income of your business or property in 2020. In order to prove that your business is has a steady track record, be prepared to provide more than the standard 2 years of income tax returns – providing 3-4 years as well as 3-4 years of personal tax returns will set you up to be a more solid candidate.

Every lender has different requirements. Make sure to confirm these requirements ahead of time, and then have the additional documentation readily available – as it will more than likely be called upon.

Tip #2: Prove Higher Debt Service Coverage Ratio

While in 2019, a DSCR of at least 1.15 showed that a business generated enough income to service its debts, such a ratio is no longer accepted as the standard when it comes to applying for commercial loans. In order to put your best foot forward, show how your business is strong enough to last the pandemic by proving a higher debt service ratio of at least 1.2-1.25 or higher.

In order to prove DSCR, banks and lenders used to require copies of bank statements. However, as a result of the pandemic, we’re seeing lenders ask for recent month-to-date bank statements to give a more accurate real-time look at how your business is keeping up with its payments. (These are truly unprecedented times!)

Tip #3: Add your PPP or EIDL to your Debt Schedule

If you received a PPP or EIDL, you’ll need to secure additional documentation for your application. Make sure to communicate with your CPA on whether or not your loans will be forgiven, and then make sure to add them to your debt schedule.

If your PPP loan is forgiven or WILL BE forgiven, make sure to have all statements, payroll, and other documents on hand to support your claim. If you received an EIDL, treat it as an SBA loan in lien position — as it is similar but not superior to a SBA 7a loan.

Tip #4: Re-Verify Your Business and Personal Credit Scores

One of the biggest mistakes we see during the underwriting process is that the borrower was unaware of changes to their credit scores. It is extremely important, more than ever, to know both your business AND personal credit scores from all of the major bureaus.

And please, we know that the deals right now can be tempting — but hold off on making any major purchases, such as a home or even luxury vehicle, until after your loan is approved!

Tip #5: Provide Statement About COVID-19 and Your Business

Treating your lender like they are your partner in your business endeavors is key. In addition to providing all proper income and credit verification as detailed above, consider also providing a personal statement that outlines the effects of the pandemic on your business. Per the SBA, this statement should include:

  1. How has your business revenue/staffing levels been impacted?
    • Do you have a plan in place to return these levels to “normal” operation?
    • What’s your contingency plan in case those levels are not met for the next 18 months?
  2. How have any restrictions such as “stay-at-home orders” and its limitations impacted your cost projections, clientele or access to supplies, inventory and/or equipment?
  3. What other COVID-19 impacts have affected operational cost of your business? (ie. sanitation supplies, protective gear, and other essential costs for protecting the business and its employees?)
  4. Is there any reliable historical financial information for your business based on the current market conditions that can predict its probable success?
  5. How concentrated or diversified is your customer base? and How dependent are you on those concentrations?
  6. How diversified are your vendors/suppliers? and How dependent is the success of your business on those particular vendors/suppliers?

Whether or not you’re applying for an SBA loan, make sure you have this comprehensive statement ready to go.

In conclusion…

Times have changes, and so must your loan application. By thinking like a pandemic-era lender, and preparing your documents like a pandemic-era invest, you’ll save yourself a lot of time from having to go back to the drawing board… and these days, timing is everything!

Speaking of timing, do yourself one better than simply implementing these tips — consider working with a Commercial Loan specialist, like those at ComCapFL. Unlike a broker who simply finds a loan that matches your requirements, a commercial loan specialist leverages their private funds and industry relationships to find the loan that works for you and your specific goals. Working with a commercial loan specialist from the beginning of your loan process won’t only assist you on elements of the loan, such as the application — but it will also keep you from having to start all over again in the case of push back or denial!

At ComCapFL, if we accept your loan request, we’ll close your loan. To learn more, email us today at info@comcapfl.com or call us at (888)959-1648 and find out what we can do to help fund your commercial real estate or business project.

Blog, Commercial Loan News, Commercial Real Estate, Fast Business Loan, SBA

How the Commercial Financing Landscape is Changing Amid the COVID-19 Pandemic

Surviving Financial Lending Crisis of 2020

…this is the new normal.

There has been a major shift in the landscape of commercial and business lending as result of the recent economic shutdown due to COVID-19. Some of the effects on the economy are obvious, while others are not yet as clear.

On an individual level, our country is witnessing an unemployment crisis. We are seeing the highest unemployment rates since the Great Depression. While some expect to be out of work only temporarily, many will find their job loss to be permanent. While the real numbers are yet to be determined, it’s possible that as many as 20 million Americans will remain jobless in the near term, despite businesses reopening and inviting workers back. Some of the other resulting effects of this widespread unemployment will take months and possibly years before their full impact becomes apparent.

Meanwhile, businesses are facing unprecedented challenges. While many were hoping for a safety net from the CARES Act, most will soon close their doors. While these loans were intended to save small business, lax guidelines for borrowing caused most of the PPP and EIDL money to go to large business and corporations through carefully exploited loopholes. In good news, perhaps some small businesses will find other financing relief as a few private equity and bank-owned funds are getting back to agency and SBA loans. Although SBA loans have been available in both 7a and 504 programs, exposure and risk are now being considered even more carefully. Take SBA 504 loans for example: Currently, SBA 504 programs have become scarce and are no longer available under $1 million. Because of the effects of COVID-19, every lender is treating their due diligence requirements differently and being careful to measure the impact of the recent months on each individual business loan request.

In the commercial real estate markets, most banks and alternative lenders are being overly cautious. Many find themselves running behind from using remote workforces or from trying to keep up with deployment of the PPP loan program. In most cases, they’re prioritizing existing clients in the interest of protecting exposure and portfolios, rather than taking new clients and originating new loans.

In the commercial property space, the jury is still out on retail, office and mixed-use properties in terms of the predominant components of these property types. The least affected property types appear to be multifamily apartments and to a lesser degree, industrial properties. The CLO lenders, who utilize the credit market to originate loans, are sidelined; and unprecedented new rules are being written for exposure, leverage, and cash reserves. Most lenders are adjusting their LTV percentage, with very few going over 65% and virtually none of them doing cash-out or non-recourse loans. While there’s still plenty of money sidelined in private equity, CMBS has been slow to restart, and private equity funds that are top-heavy are carefully examining every risk, with many deals getting pushed to the side. These days, a multifamily commercial loan over $1 million is more likely to come through an agency-backed program like Freddie Mac than from a balance sheet loan.

While we don’t have a crystal ball, at ComCapFL, we do have decades of experience in changing markets. Our read on the current market is that we will continue to see very little aggressive lending from the banks who have grown more cautious steadily over the years, even before COVID-19. However, it will take many months before we start to get a real feel for the overall impact on the US and world economies. A good comparison to the current situation would be the Black Monday market crash in October of 1987, the largest one-day drop since the crash in 1929 that preceded the Great Depression: Whereas consumer sentiment returned to normal rather quickly around 1988, it wasn’t until October 1990 that the economy actually re-stabilized and we entered into an almost 10-year bull market.

Make no mistake about it, our country is definitely in a very volatile position with its rapidly changing landscape for commercial money. That’s why now, more than ever, it’s extremely important that you have a competent and experienced commercial financing professional to help guide you through the current market and lending climate. Going at it alone may prove to be extremely difficult for even the most seasoned investors and stabilized businesses.

At ComCapFL, we’re here to assist you in navigating through these turbulent waters and getting you through these tough times. Give us a call at (888) 959-1648 or email us at info@comcapfl.com to speak to a specialist about real solutions for your business or real estate investment financing.

Commercial Real Estate, Fast Business Loan, SBA, What's Closing Now

$242,000 Term Loan/SBA – Dental Office Construction

Augusta, GA

Another client of ours, a dentist, was using his personal credit cards for his business expenses. Because of this, the client had a personal FICO score lower than 600. With a low FICO, no lender could close any loans for this client.

This is something we see often in early-stage businesses. Using a “two-step” approach, we moved all his personal debt over to the business (where it belonged), boosting the personal FICO into the 800 range. A follow-up with an SBA Express loan was approved and closed within 3 weeks. With the new loan, the dentist could finally execute his plans for constructing a new office in 2020.

Often, when it looks improbable or even impossible, chances are — we’ve seen the situation before. We’ll know exactly what to do and thus, we have the the solutions to securing you the loan you need.

Archive, SBA, What's Closing Now

$1,144,500 SBA Restructure, Refi CRE – Manufacturing Co

Refinance – Industrial

A 25-year-old family business ran into a wall with the bank. The bank called their note post-recession just as their real estate collateral value dropped. The pressure was on and business was slow.

What the business did not know is that the SBA is also tasked with saving good, solid businesses that hit a rough patch as a result of the economy. They do this all in the interest of protecting and preserving jobs and protecting our small business economy – which is the lifeblood of America.

We solved their problems by consolidating their debt, restructuring and refinancing their commercial real estate and equipment. We also secured financing to provide working capital to catch up on their past-due vendor accounts in order to continue expanding production. Because of these SBA loans, the company was able to stabilize, resume production and carry on their legacy.

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