Commercial Mortgages, Business
Loans and Stock Loan Financing:
What do Commercial Property
Investors, Business Owners and Stock Owners need to know before applying?
Hello, my name is Jimmy Wimbley, I
am a Commercial Mortgage Broker, I have been working in this space for several
years and have learned a few things about this industry and people in general –
I would like to share some of my insights with you.
For many commercial property
investors, business owners and stock owners securing the right financing is one
of the most important function that they are required to do – this can mean the
difference between running a successful business enterprise or Chapter 11 – for
those of you not familiar with Chapter 11 – that is a Business Bankruptcy – do
your research, take your time and get it right.
The first order of business is to
locate a broker, lender or investor who is willing and able to get your deal
done in the first place. I would like to give you some free advice at this
point – Do not, I repeat do not give anyone, anywhere money upfront for just
talking to you, talk is cheap and having a conversation is free – I am saying
do not be willing to pay for anything, those third party reports will have to
be paid for, such has appraisals, marketing reports, feasibility studies,
surveys, site inspection, environmental report phase one or two, engineering
examination fees, background checks, tri-merged credit reports, Bun and
Bradstreet Business credit report and attorney fees, most of these can be paid
at closing out of the loan proceeds, but there are certain vendors whom will
demand payment once the reports are finished or they will not release them to
the lender.
For commercial loans your loan
will be either a purchase or refinance, it will be either debt or equity. With
a purchase you will need to satisfy the lender’s down payment requirements,
which are 30% to 50% of the purchase price. With a refinance you will need
anywhere from 30% to 50% worth of equity in the property. Also, with refinance
you will need to show ownership for the past 12 to 24 months. With a purchase
you will need a signed purchase agreement in place with the current seller as
well. With equity you will be giving up anywhere between 50 to 80 percent
ownership of the project, this is when we bring in an equity investor, angel
investor, private investor, or a venture capitalist. The next step is to
produce a top tier Executive Summary and an Investment Grade Business Plan – an
example of both documents is on our website. If your deal is a simple CRE LOAN,
you still need a Commercial Loan Application, Business Loan Application or
Stock Loan Application, sending an Executive Summary along with these
applications is a plus as well.
Please keep in mind we are only at
the beginning of the process, once we submit your project or deal and a funder
decides your project is a fit they will ask for supporting documents, this can
be certified financial projections / forecasts, financial statements, credit reports –
personal and business taxes, most recent stock brokerage account statement, for a business loan – three months’ worth of
your business bank statements, income statement, corporate filings, core team
resumes / CV’s or Bio’s, Sources / Use of Funds, a signed purchase contract –
this list can get quite extensive – whatever documents the lender / investor is
asking for is solely to determine whether or not they will underwrite and close
your loan – if the underwriters do not get these docs in a timely manner they
will turn your loan request down. Please contact Wimberly Funding if you have a
project, business loan or stock loan you need to get funding for.
Hello, my name is Jimmy Wimbley, I am a Commercial Loan Broker and I get asked this question quite often, “Why should I work with a Commercial Loan Broker and instead of working directly with a Direct Lender” which is actually a good question, I will tell you, if your deal fits their matrices and there are no issues with the property, the income of the property, your financial profile, the appraisal or title, you can save yourself some money on interest rates and broker points by working with a lender, by all means close the loan and move onto your next project. But, if for some reason you are denied funding, find yourself a competent Commercial Loan Broker.
A competent broker is one who will not only give you the upside on funding your deal, but also the downside as well, remember, he is not going to get paid unless the deal closes and funds, he is not going to want to spend months on a file that is not fundable, there are certain documents we ask for that tells us a lot about a borrower, one of them is a Personal Financial Statement. Every broker understands they are not going to get paid unless they close and fund the deal, their time is precious, if the deal cannot be funded, admit that early and on move on to the next file. Brokers, if they are honest with themselves will admit they have no power or control over whether a lender decides to fund a loan – it is up to the lender and their underwriters.
Remember this, a commercial loan is considered a business loan, they are regulated differently than a primary resident loan and they are underwritten differently as well. If a commercial loan goes south, that lender is stuck with the property and may lose money on the deal if it’s not structured correctly. Keep in mind when I say commercial loan I am talking about MEGA deals $10M dollars and up, so, $75M to $250M tied up in a bad non income producing commercial property can put a lender out of business, quick – that is why the underwriting for these loans is extremely strict.
Commercial properties are underwritten on (10) year notes, they are amortized over 30 years, this is to keep the monthly payments low, but most of them are ballon notes or have a call feature that makes them due in (10) years. One of the reasons a commercial property owner will lose his property is when he took the loan out (10) years ago he got a 3% or 4% interest rate, now that rate is at 7% or 8%, the income on the property cannot service the new debt load. This borrower needs to work with a Commercial Loan Broker who has a vertical integrated lending platform, this is where a broker can submit a borrower’s file to a data base of several thousand lenders and an AI agent will pick several lenders who can match his old (10) year rates and terms – there are lenders out there, but you have to know where to look.
Have questions about your next project or financing needs? Please contact us at the below email address, we’d be happy to help.
