SBA Fallout Loan Program

SBA Fallout Loan Program Feature	Characteristics
Loan amount	$500.000 - 7 Million
Minimum Fico	660
Minimum DSCR	1.30
Maximum LTV	90% for multi use properties (office, retail, condo, warehouse, medical office, mixed use, light industrial). 85% for special use properties (automotive, assisted living, hotel, motel, restaurant, day care)
First Mortgage	First mortgage 50% and Second mortgage up to 40% First mortgage amortized up to 25 years and Second mortgage up to 20 years. Second mortgage rates is fixed for 20 years
Must be owner occupied 51%+ to qualify under this program
Loan Purpose	Purchase only
Underwriting philosophy	Global Cash Flow Underwriting
Closing time	60 days if complete package
Loan programs available	1. Adjustable (prime plus 2.75%) 2. 3 Year Fixed: Rate starts at 5.5% with 5 year declining prepayment 3. 5 Year Fixed: Rate starts at 6.5% with 5 year declining prepayment (the above two options only apply to the first mortgage) 4. The second mortgage will carry an interest rate of approx. 5.5% fixed for 20 years and amortized over 20 years 5. Seller Financing allowed by, borrower must have Minimum Equity of 10%

Loan Program

TRTY          Nationwide
AMNT         $50k - $5M  (higher case by case)
LTV            50%
INT             7 - 8%
PTS            1
TRM           5 / 1  ARM, 30 year amortization
PPP           None

Property Types:    1 - 4 Unit, Mixed Use, Commercial

Refinance, cash out with new appraisal needs 12 months ownership
           cash out less then 12 month ownership is 50% LTC

Commercial and Hotel Lending, LTV 75% or Higher

Commecial & Hotel Lending, LTV of 75% or Higher

Loan Program # 1

TRTY    Nationwide

AMNT   $225k - $15M

LTV       Up to 80 - 85%  (CLTV allowed up to 90%)

INT       Conventional Market

PTS      1 - 3

TRM     5 / 25

PPP      5-4-3-2-1

All Commercial Real Estate Types

Loan Program # 2

                                                                     Bad Credit

TRTY    Nationwide, Except CT, VT            Bad Property              Construction

AMNT   $250k - $25M                                 $250k - $25M             $250k - $25M

LTV       Up to 95%                                       Up to 70%                   100% LTC of 90% ACV

INT       5.25 - 8.0%                                     10 - 13%                      7.25 - 12%

PTS      2 - 4                                                 2 - 4                             5

TRM     25 / 25                                             1-3-5 year                    2 - 4 years

PPP      Fixed Period                                    Fixe Period                  None

CRDT   640                                                  None                            650

Loan Program  # 3

                           Construction      Bridge                Commercial

TRTY                 Nationwide         Nwide & Internl  Nationwide

AMNT                $1M - $50M       $1M - $100M     $1M - $50M

LTV                    90% LTC                         80%                   80%

INT                     6 - 9%                9 - 14%              6.5% and Up

PTS                   3                         1 - 4                   1 - 4

TRM                  5 / 25                  1 - 3 years         5 / 25

PPP                   None                  None                  5-4-3-2-1

Gas Station with or without Convenience Store Lending

Loan Program # 1

Territory          Nationwide
AMNT              $100k - $2M
LTV                 65%
INT                 10 - 15%
PTS                 3 - 6
TRM               12 - 36 months
PPP                None
CRDT             Not FICO driven

Bridge / Hard Money Loans / SBA Fallout  - Looks usually at O/O Commercial
Trophy Homes: AZ, CA, CO, FL, ID, HI, NV, NY, OR, UT, WA
Construction / Construction Completion $1M and up, SE & SW $200k and up


Loan Program # 2

TRTY            ID, WA                        Nationwide
AMNT           $50k - No Max            $300k - No Max
LTV              70%                            70%
INT               9 - 15%                      12 - 14%
PTS              2 - 6                            4 - 5
TRM             12 - 36  months          12 - 36 months
PPP               None                          None


Loan Program # 3

TRTY            National         
AMNT           $25k - $2M
LTV              65%
INT               10 - 14%
PTS              3 - 6
TRM             6 - 24 months
PPP              No
Credit           No score requirements

Stated and Full Doc to 65% LTV
DSCR may be relevant in some cases


Loan Program # 4

TRTY           Nationwide
AMNT          $100k -  $5M
LTV             50 - 70%
INT              10 - 15%
PTS             2.5 - 6
TRM            15 / 30 
PPP             None

Will not lend on 1 - 4 unit apartment buildings

Multifamily, Apartments, Mixed Use, Office, Retail, Warehouse,
Industrial, Shopping/Stip Centers, Storage, ALF, Mobile Home Park,
Auto Repair, Restaurant, Daycare, Funeral Home, Gentleman's Club,
Gas Stattion, Motel, Church, B & B, Golf Course, Dary Care, Other

APARTMENT FINANCING: Up To 90% LTC

TRTY             Nationwide

AMNT          $2M (minimum)    Cash Flow Analysis

LTV               75 – 80%               Nationwide

                      90%                       Boston, DC, New York City, San Francisco, San Jose

CLTV             Cased by Case       Seller seconds allowed

INT               6.5 – 7.5%            Interest Only

PTS               2 – 4                      To Lender

TRM             1 – 2 years

PPP               No pre payment penalty

CRDT            Not credit driven

DSCR            Not  ratio driven

Loan Types:                       Acquisition, Refinance, Renovation, Repositioning,

                                             DIP Properties, REO Purchase, Low Occupancy Properties

Property Type:                 Buildings or Complexes

Cash Flow Analysis:         Common sense evaluation, need sufficient cash flow to pay debt service or show ability to pay debt service during term of loan

High Net Worth Borrower: Properties in Multiple States, Commercial and Owner Occupied Residential Loans

Inevitably high net worth borrowers run into a scenario that requires equity based financing (also known as a private money loan or hard money loan). Since high net worth borrowers, at least at the moment, are gradually being stricken from the traditional financing mold, the onus is placed on the mortgage broker to find an alternative source of financing for their valuable projects.

Whether the borrower is a corporation or just a high net worth individual, they’re needs are typically very similar: they either need capital to move a valuable project forward or they need access to liquidity to handle day-to-day expenses. Whatever their situation, the circumstances are typically always the same – they have money, but it’s tied up in their assets. Enter private money lenders: mortgage finance companies with the ability to underwrite and fund on an equity basis without making borrowers jump through circus hoops to get access to the capital that they need.

The process of obtaining an equity loan can be simple at times, especially when borrower have significant equity in a property and are looking for a smaller loan amount to bridge a financial need. However, it gets much trickier when a borrower has plenty of equity but it’s spread out over multiple assets. It’s even worse when those assets are spread out into different states, as is the case when borrowers have multiple residences or have investment holdings in a number of different areas. There are several reasons why this can be a deal breaker for many private lenders:

1. Most private lenders will not operate in all of the states that the assets are located in. 

A private lender may be willing to lend in Florida, but the second that they have to secure a second home on the Jersey shore as additional collateral they’re suddenly not interested in financing the loan submission anymore.

It could be a licensing issue, an underwriting issue, an investor issue, or even an experience issue. Whatever the reason, geography is going to be a deal killer to plenty of private money lenders. If they don’t lend in a number of different states, their propensity to handle high net worth borrowers plummets.

2. Most private lenders aren’t willing or prepared to handle the legal issues with loans that cross state borders

Especially when it comes to mortgage lending, every state’s laws and procedures are different. Private lenders often develop a comfort zone in a specific state or area of the country simply because they get to know the laws and understand the risks inherent with a defaulted borrower in that geographic location. Taking on a new state and attempting to understand its laws and how they’ll relate to the laws in another state can be daunting. The complications of cross-collateralization across state border can be difficult, and many lenders simply won’t venture out that far.

3. Most private lenders don’t want the hassle of managing multiple pieces of collateral

Sometimes the problem lies in the simple fact that a lot of lenders don’t like cross-collateralization. Either they’re not set up for it, it doesn’t fit their philosophy or it’s too complicated for them. It doesn’t fit into the common formula of: take application, set LTV, appraise property, approve loan, fund loan. There’s a lot of work that goes into assessing the risk of cross-collateralizing as it related to foreclosure, and many lenders simply aren’t going to be willing to go there.

The good news in all of this, of course, is that we work with a Lender willing to go there. We specialize in loans to high net worth borrowers that have property in multiple states and require equity-based financing on their real estate. We regularly approve and fund loans for borrowers that have multiple pieces of collateral to pledge for an equity-based loan. We actively lend in all 50 states and we’re not afraid to deal with slightly more complicated transactions for both commercial and residential loan requests.

If you’re looking for a private loan, hard money loan, or equity-based financing and you’re struggling to find a lender with the flexibility and geographic reach that you require then we are the source for you.

FAQ's Commercial Lending # 1

FAQs: Commercial Lending

What does "Loan-to-Value" (LTV) mean?
This is a ratio used by lenders to determine how much they will lend on a particular property. It encompasses the ratio of the loan amount to the value of the property. For example, let's say that an investor/borrower wants to purchase a property that is valued at $5,000,000. He/she pays $1,000,000 as a down payment, meaning this individual would be seeking a loan amount of $4,000,000. Thus our ratio of loan-to-value would be $4M/$5M, or 80%. Generally, a lender prefers to see an LTV no greater than 75%, but most will go higher if the quality of the property is exceptional and/or the borrower has a substantial net worth.


What is meant by a "point"?
When we are talking about financing, the term "point" essentially means percent. For example, one point on a one million-dollar loan is equal to $10,000, or 1% x $1,000,000.


What is a rate lock?
Borrowers do not want to be surprised at the close of the transaction with a rate which is higher than what was quoted at the beginning of the process. Hence, many borrowers ask that the lender commit or lock the initial rate that was quoted for the length of the loan. When a rate is locked, the lender is being asked to guarantee the price of a commodity, the price of which may change on a daily basis. (For example, check out the fluctuation of the bond market -- a daily measure of the price of money.) The longer the lock period, the riskier the position of the lender, hence the higher the loan price (points) charged the borrower.


What is meant by "capitalization rate"?
The capitalization rate, or "cap rate" as it is more commonly referred to, is a ratio used to estimate the value of a commercial real estate property.
In more general finance terms, according to the Appraisal Institute, it is a method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step, by dividing the income estimate by an appropriate rate.
The relationship between Cap Rate (R), Income (I), and Estimated Value (V) is as follows:

V = I / R
I = V x R
R = I / V


What is "Debt Service Coverage Ratio" (DSCR)?
The final ratio that a lender will use when evaluating a commercial real estate or income-producing property is the debt service coverage ratio (DSCR). The debt service coverage ratio is a sophisticated ratio only used for large loans on commercial real estate and/or income-producing property.
The debt service coverage ratio is often used by loan officers when making loans to perspective income property loans.

A Closer Look at DSCR.
The most important ratio to understand when making income property loans is the debt service coverage ratio. It is defined as:
DSCR = Net Operating Income (NOI) / Total Debt Service
To understand the ratio it is first necessary to understand the numerator and the denominator. Let's take a look at net operating income (NOI) first.
Net operating income is the income from a rental property left over after paying all of the operating expenses:
Gross Scheduled Rents $100,000
Less 5% Vacancy & Collection Loss $5,000

Effective Gross Income: $95,000
Less Operating Expenses
Real Estate Taxes
Insurance
Repairs & Maintenance
Utilities
Management
Reserves for Replacement
Total Operating Expenses: $30,000

Net Operating Income (NOI) $65,000

Please note that lenders always insist on some sort of vacancy factor regardless of the actual vacancy rate in an area to cover collection loss. In addition, lenders always insist on using a management factor of 3-6% of effective gross income, even if the property is owner-managed. Their logic is that they would have to pay for management if they took back the property. Finally, NOTE THAT WE HAVE NOT INCLUDED LOAN PAYMENTS AS AN OPERATING EXPENSE.

Next let's look at the denominator, Total Debt Service. This includes the principal and interest payments of all loans on the property, not just the first mortgage. NOTE THAT WE HAVE NOT INCLUDED TAXES AND INSURANCE. They were already accounted for when we arrived at the net operating income (NOI).
To calculate the debt service coverage ratio, simply divide the net operating income (NOI) by the mortgage payment(s). For the sake of simplicity, let us assume that there is only one mortgage on the property:
$500,000 First Mortgage
11% Interest, 30 years amortized
Annual Payment (Debt Service) = $57,139

Then:
DSCR = Net Operating Income (NOI) = $65,000
Total Debt Service $57,139
DSCR = 1.14
Obviously the higher the DSCR, the more net operating income is available to service the debt. From a lender's viewpoint it should be clear that they want as high a DSCR as possible.
The borrower, on the other hand, wants as large a loan as possible. The larger the loan, the higher the debt service (mortgage payments). If the net operating income stays the same, and the loan size and therefore the debt service increases, then the lower the DSCR will be.
Life insurance companies are very conservative and generally require a 1.25 or 1.35 DSCR. This means that their loan-to-value ratios are low. Savings and loans (S&L's) generally only require a 1.20 DSCR, and sometimes will accept a DSCR as low as 1.10.
A DSCR of 1.0 is called a breakeven cash flow. That is because the net operating income (NOI) is just enough to cover the mortgage payments (debt service).
A DSCR of less than 1.0 would be a situation where there would actually be a negative cash flow. A DSCR of say .95 would mean that there is only enough net operating income (NOI) to cover 95% of the mortgage payment. This would mean that the borrower would have to come up with cash out of his personal budget every month to keep the project afloat.
Generally lenders frown on a negative cash flow. Some lenders will allow a negative cash flow if the loan-to-value ratio is less than around 65%, the borrower has strong outside income such as an electronic engineer, and the size of the negative is small. Lenders rarely allow negative cash flows on loans over $200,000.