- This loan is the most common of all SBA Loans because eligibility is based upon the business and the principals.
- Funds can be used for any type of business except those specifically prohibited by the SBA Regulations.
- Primary consideration in the underwriting decision process looks to the repayment ability of the borrower from the cash flow of the business. other factors as important as cash flow include management experience, business cash available for purchases, and to a lesser degree – collateral.
- Loan proceeds may be used to start-up a business, assist in the purchase, expansion or need for working capital of an existing business, the purchase of equipment, renovation or construction (in essence for any good business purpose).
- SBA term length and amortization depends on whether the loan will be used for business only purposes or used in conjunction with a real estate purchase. If 51% of the loan amount is used for the purchase of real estate, then the loan will be eligible for the longest terms/amortization of 25 years.
- SBA Loans are always required to have personal guarantees. A personal guarantee makes the Borrower/Guarantor personally responsible for the repayment of the loan. Any defaulted loan or shortfall after a real estate foreclosure becomes the personal debt of the Borrower/Guarantor.
Loan Programs
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- These loans must be used for particular purposes: To purchase or refinance real estate which can have a renovation component and ground up construction, or to purchase equipment with a long depreciable life.
- The SBA Regulations now allow an SBA 504 Loan to refinance debt with a real estate component to the loan. However, to refinance the debt, the Borrower must have had the original debt for a period six months period of time before the loan submission.
- There are three components to this loan: Borrower / SBA Lender / Certified Development Corp (SBA). The Borrower will contribute 10% – 15% of the transaction cost, the SBA Lender will contribute 50% of the transaction cost and the CDC (Certified Development Corporation) will contribute the balance of the loan.
- The term and amortization length is different for the SBA Lender and the CDC. The Lender will have terms up to 10 years with an amortization of 25 years. The CDC will have a term and amortization of 25 years.
- Personal Guarantees are always required for these loans. A personal guarantee makes the Borrower/Guarantor responsible for loan pay back for any and all shortfalls if there is a foreclosure.
- Prepayment Penalties will be required in the terms of the two loans. The SBA Lender prepayment penalty will be on a 5 or 10 year basis. The CDC will have a 10 year period for the prepayment penalty.
- The USDA (US Dept of Agriculture) helps borrowers by providing guarantees to lenders for rural businesses and properties.
- Its primary purpose is to create and maintain employment and improve the economic climate in rural communities.
- USDA Loans may be used for start-ups, business expansion, business acquisition, commercial real estate, working capital, machinery, equipment, inventory and debt refinancing.
- A USDA Loan allows up to 90% financing.
- This program represents a true private-public partnership.
- For those properties that do not have enough income to qualify for a full documentation loan, or for borrowers who do not want to go through the full documentation loan process, the DSCR Loan Program provides the best option for long term financing.
- Properties can be in a metropolitan area or a rural area
- Properties must have a minimum of one tenant
- Properties can be residential investment, mixed use with residential being more then 50%, or parcels with more then one house.
- Credit Scores can be as low as 660 (with 640 case by case)
- Investors with no experience are eligible
- Rates and Terms are commensurate with the strength of the Borrower (Experience, Cash Available,Credit Scores) and the strength of the Property (Value, Percentage of Occupancy, Rents, Expenses)
- 5 – 20+ units Residential Structures including Mixed Use with Residential being more then 51% of the Tenants
- Amortizations up to 30 years or Interest Only up to 3 years and then amortized
- Terms (loan is due and owing) for a period of 5 – 10 years
- Loan Programs Available: Full Documentation, DSCR, Bridge and Purchase/Rehab
- All loans need the following Documents: Rent Roll and Summary of Annual Expenses (re: Taxes, Insurance, Landscaping, Trash Removal, Common Electric)
- Minimum credit score is:
| Full Doc | 680 |
| DSCR | 660 |
| Purch/Rehab | 620 |
| Bridge | 600 |
- 30 year Term and 30 year Amortization with standard 5 year Prepayment Penalty
- Prepayment Penalty can usually be reduced for additional cost
- Credit Score has a requirement of 660 (less on a case by case basis)
- CLTV up to 90% is offered on a case by case basis
- LTV is in the 70% to 75% range
- Real Estate Value is a minimum of $350,000 dollars
- Loan Amount is a minimum of $250,000 to a maximum of $25 million (larger loans are available on a case by case basis)
- Geographic Area: Nationwide
- Residential structures including Mixed Use, Apartment Complexes and Parcels with more then one structure
- Loans are based on the experience of the Borrower along with property location
- No experience Borrowers are eligible with General Contractors who have the qualifying experience
- Minimum middle credit score is 600
- Documentation includes General Contractor: Itemized Budget and Draw Schedule
- Loan Parameters:
| LTV | Up to 90% | (purchase) |
| LTC | Up to 100% | (rehab costs) |
| ARV | Up to 75% | (after renovated value) |
- The Best Rates and Terms for Multi-Family financing is full documentation loans from a bank or FNMA / Freddie Mac
- Full Documentation means documents need to be provided by the Buyer and the Seller
- Buyer – Personal Tax Returns, 3 Years
- Buyer – Business Tax Returns, 3 Years (all businesses)
- Buyer – Personal Financial Statement
- Buyer – Schedule of Real Estate Owned
- Buyer – Bank Statements
- Buyer – Other documents as needed
- Seller – Tax Returns for Subject Property, 3 Years
- Seller – Profit & Loss Statement, YTD
- Seller – Rent Roll
- Seller – Leases (Usually less then twenty units)
- Other documents as needed
- Underwriting delves into the personal finances and personal information of the Buyer
- Underwriting delves into the cash flow history, expenses and looks at the strengths and weakness (on paper) of the subject property
- Standard terms are five (5) and ten (10) years with amortization of thirty (30) years.
- LTV is up to 80% for a purchase and 75% for a cash out refinance
- There will usually be a Prepayment Penalty either static (5-5-5-5-5) or declining (5-4-3-2-1)
- There are two standard ways to finance Multi-Family Properties: Conventional Bank Lendingand FNMA / Freddie Mac Lending
- Conventional Lending can be found in our section on this loan choice
- FNMA financing(Federal National Mortgage Association) is commonly known as “Fannie Mae”
- Freddie Mac (FHLMC) has similar government guidelines
- FNMA and Freddie Mac loans do not require a Personal Guarantee (Non-Recourse)(There are exceptions for illegal activity)
- FNMA and Freddie Mac Loans can be used to finance: Apartments, Affordable Housing, Senior Housing,Student Housing, and Mobile Home Parks
- Loan amounts start at $750,000 dollars. However, Intermediaries who underwrite the loans for FNMA and Freddie Mac, will not accept loans under $1 Million dollars
- Loan Terms are for five (5) to ten (10) years. Amortizations are up to thirty (30) years
- LTV criteria go up to 80% for Purchases and 75% for Refinances
- Borrowers can use bridge financing to fund real estate projects which are not ready for any type of permanent and long term lending
- Bridge financing can give owners of real estate the flexibility they need to reposition and stabilize properties
- These loans have maximum flexibility to fund any type of real estate for most any type of transaction or project
- The Borrower must have a good reason for the Bridge Loan (Quick Closing, Purchase/Occupy/Hold, Eviction Required, etc)
- If renovation is required, the Buyer must have ready for loan submission an itemized budget and draw schedule for renovation work (proof of future tenant occupancy may also be required)
- Conventional commercial loans are mortgages that are provided by a bank, credit union, savings institution, or other traditional lender.
- Conventional mortgages are secured by a first lien position on the subject properties being financed.
- The collateral is usually a standard type of commercial real estate: Multi-Family, Office, Retail, Warehouse, Industrial and others on a case by case basis
- These loans require a personal guarantee.
- Borrowers must have the requisite cash for larger down payments, high credit scores and either some experience or retaining a management company for this experience.
- 1-4 Unit Housing and 5-20+ Unit Housing
- Ownership of Land can be credited toward the ‘down payment’
- Loan Amounts are based on the experience of the Borrower along with the location of the subject property.
- Minimum middle credit score is usually 640 (case by case lower)
- No Experience is required with the General Contractor’s history of completing like kind projects (documented)
- Lending Parameters
- Up to 100% Loan to Cost (LTC)
- Up to:
- LTV 90% of Purchase Price
- LTC 100% of Construction Budget
- ARV 75% of After Repair Value
- Invoice Factoring is quick and flexible. We can fund $5,000 a month up to $2.5 million a month
- We utilize your account receivables as collateral and advance funds against the face value
- Invoice factoring allows your credit line to grow with your sales cycle
- Invoice factoring can have cash in your hands within 48 hours
- This is not debt. Never worry about adding payments to your monthly expenses
- If you experience 60-90 day delay in payment on product delivered invoices, factoring will keep your cash flow coming in regularly
- Factoring (Account Receivables)
- Inventory Loans
- Purchase Order Loans
- Equipment Purchase & Refinance Loans
- Equipment Sale-Lease Back Loans
- Equipment Leasing Program
- Personal Guarantee / No Personal Guarantee
- Unconventional Collateral: Jewelry, Vehicles, Stocks & Bonds, Art Work, Antiques, And other objects of value
Daily Payment Loans
- Lite Documentation Underwriting
- Five (5) business days from full loan submission to close
- Loans from $25,000 to $5,000,000
- Business in existence for minimum of three (3) months – Standard Underwriting
Business is a Start-Up – Based on Borrower net worth, good credit & projections - Minimum credit is 550 middle
- Business revenue is minimum $50,000 annual
Weekly & Monthly Payment Loans
- Full documentation underwriting
- Twenty (20) business days from full loan submission to close
- Loans from $25,000 to $2,000,000
- Business in existence minimum of two (2) years
- Minimum credit is 640 middle
- Business revenue is minimum of $100,000 annual