Commercial Real Estate Loans ? Still Closing!

By far the most positive aspect of commercial real estate financing is now SBA loans.  Via the Obama Stimulus Package, SBA loan are still funding and the banks that are still in the market, are pushing all of their clients to go this route.    

For banks, the Stimulus Package increased the guaranteed portion of the SBA 7a loan from 75% to 90%.  Although a lot of bankers will tell you this doesn’t mean that a lot, simply because the government can get out of following by means of on the guarantee, having some sort of backing is a lot much better than none at all.

For borrowers the principal benefit is having a closed loan.  A lot of borrowers do not recognize the significance of this point.  Others incorporate the widely published reduced fees (for example on the SBA 7a program, the normal fee of 2.75% has been temporally eliminated ).  Other significant benefits contain 90% financing and 25 year amortization schedules.

A lot more information on SBA loans: http://www.cfa-commercial.com/SBA-7-Loan.html

Conventional financing continues to tighten, whether for owner occupied or investment properties (non multifamily).  What we are seeing actually close, on the conventional side is loans below 60% loan to value, with very powerful borrowers.  Most banks now want to see powerful secondary sources of income and high levels of post close reserves.  Although there’s no set number/ratio a lot of banks want to see 30% in liquidity, compared to the proposed loan amount…  Some are establishing it as 12 months of mortgage payments in reserves or far more. 

Another issue on conventional financing that keeps appearing, for borrowers with investment properties, is lease term.  Banks now want to see a minimum of 5 years left on leases.  Just a couple of months ago, there was still flexibility with this, now it seems to be gone.