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There are a few new options however for the small commercial property owners (both investors and users) that are turning heads. Historically, accessibility to commercial equity via loan products has been very limited, and for good reason. Second lien position behind a separate financial institution is one of the riskiest positions for a commercial lender to be in.
However, in the past, small local banks have been known to take on these types of loans assuming that the combined loan to value and debt coverage ratios were strong - typically less than 60% LTV and over 1.4 on a DCR. Banks wrote these lines almost like a business loan that happen to be secured by the commercial building. The banks also, wanted a depository "relationship," as bankers always say, with the borrower.
Developer of large sophisticated projects also have had 2nd lien position loan options, called mezzanine loans. But these types of loans are normally only available to highly experienced and successful developers working on projects over $5,000,000.
Interestingly, a few lenders have recently stepped up and created commercial equity lines aka commercial lines of credit. The result is liquidity never before known for small building owners. Highlights include no upfront fees to close loan (no appraisal, no title, and no environmental fees), combined loan to values up to 75% and relatively low interest rates at Prime plus .75% - 1.25%.
We will see in time how much of an impact these commercial equity lines make on "Main Street" USA, but one thing is for certain: commercial property owners have more loan options now, than ever before.
Category: LoansNew Commercial Equity Loan Creates Liquidity was written by:Author:Larry TangAdded: Wed, 03 Oct 2007 22:09:50 -0400 This Article Has Been Read 96 times View all Larry Tang's articlesAbout the Author: MAiSPACE.com will help business owners and operators make smart choices in Systems Furniture, customized reception areas for their offices, and selecting the right Customized Office Cubicles. |
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