Lending institutions are still wary when it comes to their lending policies.
It's almost as if they're hoarding money! With all that stimulus cash tossed around and
the many bank bailouts, one would think banks would be opening their doors and
progressively looking for new business. Residential interest rates are
at rock-bottom, but business is stagnant.
If you have a business that requires a loan, you may not be out of luck. Following are some secured
commercial loan options and answers to help you get the loan you need.
- Know what type of commercial loan you qualify for. Is your secured loan construction, construction to permanent, refinance of existing commercial, new commercial loan with no permanent financing? Is your property type office/industrial, retail, motel/hotel or other? It has to be one of these. And being secured by the commercially zoned land or existing building plus your good credit history, your lender may be so glad to see you they'll offer a free toaster, an interest rate below six percent and 25- to 30-year terms. Loan-to-value ratios will play a big part in your secured commercial loan. It's usually 65 percent on purchase and refinance and 70 percent to 75 percent LTV if investor owned or owner-occupied.
However, you must be careful where you look in seeking your loan if it's a motel, hotel, or mini-storage facility. Most lenders put these properties under the sign that says: specialty property - persona non grata.
- If your property is secured. You must also be cognizant of the fact that your best deals can be made if your property is secured by a AAA tenant with a long-term lease or an office building that is 80 percent pre-leased with deposits. Your lender will be in hog heaven. But for now let's not include the usual suspects in getting a secured commercial loan, and make an end-run to other places who may be more receptive to any type commercial loan even if it's a farm.
- Consider SBA and USDA loans. Two places to investigate where the loan process is not complicated and the people actually take an interest in delivering a product would be an SBA loan and USDA commercial loan. The LTV's are much higher; 90 percent with excellent interest rates and terms. And if you're a good credit risk with a track record of success these outlets should be given strong consideration. In case you're not familiar with how these two programs operate, they only insure and guarantee the loan. Your bank or credit union funds the money. Naturally, if you qualify for either loan and the SBA or USDA gives the green light to the lender, everyone makes money. SBA 7a loan terms are 90 percent LTV, 20 years, with a current rate of six percent - $500,000 to $2 million amounts. USDA business/industrial terms are 80 percent LTV, 20 years at six percent - $500,000 to $10 million amounts.
- Beware of adjustable loans. Finally, whatever you do stay away from secured commercial loans using Libor adjustable loan financing. Say no thanks.