Help with Difficult Commercial Mortgages
Getting commercial real estate loans approved is almost always complex and frequently difficult. Small business borrowers need to realize that there are several commercial mortgage loan situations which will be especially difficult to get approved.
Examples of 10 difficult business loan situations are described to illustrate two key points:
(1) These difficulties are not uncommon.
(2) These difficulties can be overcome in most cases.
Difficult Small Business Commercial Loan Situation Number 1:
A commercial loan that needs to be closed in 60 days or less.
It is not unusual to discover that a traditional lender considers six to nine months "normal" for commercial loan underwriting. Obviously this will act as a severe constraint if a small business borrower is trying to buy a property that the seller wants to close in two to three months. Or perhaps you are the anxious seller who doesn't want to wait through the spring, summer and fall to get money from the sale of your commercial property in order to buy another small business property. If quick funding is essential, the business borrower should contact AEX Commercial Financing Group where most commercial loans will close in 45 to 55 days. (In order for us to achieve these quick closings, we do need to receive requested property information from the borrower on a timely basis.)
Difficult Small Business Commercial Loan Situation Number 2:
A commercial loan that won't work without long-term financing.
What is long-term financing for a commercial loan? Some commercial lenders view 3-5 years as the longest period before a commercial loan will be subject to a balloon payment. If that sounds short-term instead of long-term, AEX Commercial Financing Group can arrange long-term commercial real estate loans without recall possibilities for commercial properties. Longer-term financing will often be the critical difference that facilitates a successful small business investment (especially because mortgage payments will be reduced dramatically).
Difficult Small Business Commercial Loan Situation Number 3:
Providing financial data to a commercial lender after the loan is closed.
Some commercial loans will have covenants stipulating that the lender must receive financial data even after the loan closing and that the loan can be recalled if the audit of this data is not satisfactory to the lender. In stark contrast to this, commercial loans via AEX Commercial Financing Group based on Stated Income will not require business plans or income verification either before or after the loan is closed.
Difficult Small Business Commercial Loan Situation Number 4:
Properties (such as auto services) that involve environmental issues.
These properties are apparently viewed as riskier loans by some lenders. As a prime example of how AEX Commercial Financing Group, LLC looks at difficult loan situations differently, auto services properties have been moved to a LESS RISKY underwriting category. Properties involving environmental issues will often be politely declined by a commercial lender. If they are not declined outright, then typically a Phase I/II environmental report will be required (which can easily add $15,000 to $20,000 or more to the cost of the loan if a Phase II report is needed). The commercial borrower could end up paying this entire cost even if the report produces findings that result in loan disapproval. If the cost for a Phase I/II environmental report wasn't already a sufficiently negative issue, this requirement also adds substantial time to the commercial loan process. As a practical time-saving and cost reduction strategy for commercial loans via AEX Commercial Financing Group, an environmental insurance fee can be used to meet the special commercial loan needs of environmentally-sensitive properties (Phase I/II environmental reports will not be required). This strategy usually results in an environmental approval in 5-7 days.
Difficult Small Business Commercial Loan Situation Number 5:
Restaurants.
Many lenders have unofficially removed restaurants from their short list of commercial loan candidates. Other lenders will restrict their restaurant lending to a handful of restaurant businesses with a long track record. AEX Commercial Financing Group is very interested in bar/restaurant properties.
Difficult Small Business Commercial Loan Situation Number 6:
Borrower is self-employed or income is paid on a commission, bonus or incentive basis that is somewhat erratic and difficult to document properly.
Commercial borrowers using the Stated Income Business Loan Program at AEX Commercial Financing Group will not be required to provide tax returns or any income verification. AEX Commercial Financing also will not require small business borrowers to sign IRS Form 4506 (which authorizes the lender to obtain tax returns directly from the IRS), a form routinely required by many commercial lenders.
Difficult Small Business Commercial Loan Situation Number 7:
A borrower wants to refinance a commercial property and use $500,000 to $1 million from the proceeds to buy another property.
Most commercial lenders will restrict the maximum cash that can be taken out of a refinancing, with a normal limit of $100,000 to $250,000. It is also not uncommon to encounter restrictions on the use of the cash. With a commercial loan via AEX Commercial Financing Group, the commercial borrower could receive unrestricted cash up to one million dollars and use the proceeds without restrictions.
Difficult Small Business Commercial Loan Situation Number 8:
A borrower wants to use a substantial amount of subordinated debt (a seller second or other secondary financing) to reduce the amount of cash needed to purchase a commercial property.
Many commercial loans will not permit a seller second or other forms of subordinated debt. With a commercial loan via AEX Commercial Financing Group, a commercial borrower can obtain Combined-Loan-to-Value [CLTV] ratios up to 90% with subordinate financing (including seller seconds).
Difficult Small Business Commercial Loan Situation Number 9:
Sourcing and Seasoning of assets or ownership.
This situation refers to the fact that most commercial lenders will look very carefully at issues like the following:
(1) For a purchase, commercial lenders will frequently want documentation about where the down payment is coming from (the source, so having limitations about and investigating where the funds are coming from is called sourcing).
(2) Commercial lenders will also frequently have very specific requirements stipulating that the funds must have been in a specific account for a specific period of time, often 3-6 months or longer (this is called seasoning because it is tantamount to requiring that the funds have matured by being in the same place for a while).
(3) Seasoning of ownership is similar to seasoning of funds, except this requirement involves the minimum time someone has owned a commercial property before they can refinance the property.
AEX Commercial Financing Group does not have any requirements or limitations involving either sourcing/seasoning of funds or seasoning of ownership. One key example of where it will be extremely helpful not to have seasoning of ownership limitations: 1031 Exchanges. Borrowers who have completed a 1031 Exchange might want to tap into some of their equity shortly after a 1031 Exchange is completed. These borrowers will usually encounter seasoning of ownership limitations from many/most lenders that will effectively prevent such a 1031 refinancing. AEX Commercial Financing Group does not have seasoning of ownership limitations that would prevent this kind of transaction.
Difficult Small Business Commercial Loan Situation Number 10:
A borrower needs a $100,000 commercial loan.
What's difficult about this situation? Many/most commercial lenders will have much higher minimum amounts for commercial loans ($250,000 to $350,000 is not uncommon). At AEX Commercial Financing Group, our minimum commercial loan is $100,000.
Contact Information
Stephen Bush
Chief Executive Officer
Phone: (937) 780-4030
bush@aexllc.com
PO Box 353, Leesburg OH 45135-0353 USA
AEX Commercial Financing Group specializes in quick closings for difficult commercial real estate loans from $100,000 to $25 million and business cash advances up to $300,000 throughout the United States.
Copyright 1995-2008 AEX Commercial Financing Group and Stephen Bush.
All rights reserved.
