Restaurant owners have limited options for commercial mortgages, relative to other businesses and building types. One of the most common options is the SBA loans. Although not perfect, they can be a viable option. For one, they are still reliable and are still closing. Two, they do offer some of the lowest fixed rates available and the highest level of financing for restaurant loans.Interest rates for restaurant loans are currently in the mid 6%’s to mid 7%’s depending on the particulars of the transaction. Combine that with 85% financing on purchases AND 85% financing on refinances and it is easy to see why the SBA has had such a huge impact on American Small Businesses.Compare that to traditional bank financing, rates are about the same, but you would have to come out of pocket 30-40% of the purchase price. Refinance financing is more limited and harder to close and loan to values are normally capped at 50-60% as well. Again with the SBA programs you can go up to 85% loan to value on refinances on restaurant loans.The SBA programs have received a lot of criticism over the years, some of it warranted, some of it not. One of the biggest complaints is the time frame and bureaucratic process. A key to avoiding the long delays is to work only with PLP lenders. If you do not your loan will have to be underwritten and approved twice, once by the funding bank and secondly by the SBA. If you work with a PLP lender the loan will only have to be underwritten once, and you will avoid at least one month of delays. It is common to close SBA loans in 60 days which is right in line with all commercial loans.Another major criticism is that the fees are excessive. The SBA 7a loan normally has a 2.75% front end “SBA Guarantee Fee” and the 504 has a 2.5% fee for its half of the loan. However it is important to realize that not all lenders and the way they structure deals are the same. For example we work with a bank that will absorb/pays for this fee for the borrower. So the borrower gets all of the benefits of a long term fixed rate loan with zero fees.In terms of fixed rates it depends on how the loan is structured. With the SBA 504 you can easily get 7 to 10 year fixed rates, with 25 year amortization schedules. With the SBA 7a most are floating, however it can be offered as a 3, 5 and though rare, 10 year fixed rates. We are currently working with two banks that offer the 7a as a 5 year fixed loan for restaurants. Again, as a comparison most bank financing will not exceed 3 -5 years, and the amortization schedules rarely exceed 20 years with loan to value restrictions at 50 060%.The SBA programs can provide a lot of flexibility compared to conventional bank financing. Again, keep in mind that not all lenders/banks that use the SBA guarantee are the same. So, if you have been turned down by a bank that offers SBA loans, it does not mean that you are ineligible for SBA financing, it may just mean that the actual funding bank, didn’t like your deal. The SBA is not the lender, they are guaranteeing the loan for the funding bank in case of borrower default. At the end of the day the bank is still on the hook for the loan and banks appetite for deals and guidelines vary widely. And the way that banks structure the loans vary as well. Again, for example 99% of banks offer the 7a as a floating rate, we however have access to a 5 year fixed, 7a program.
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A Guide To Commercial Real Estate Loans
Commercial real estate (CRE) is that branch of real estate that is used solely for business purposes and monetary gain. This includes retail outlets, office buildings, business parks, hotels, and residential complexes. Financing these business ventures typically comes from commercial real estate loans. These loans are secured by liens on commercial, rather than residential, property.Differences between residential and commercial loans:Individuals vs. entitiesJust as with residential loans, banks and individual lenders are actively involved in handing out loans for commercial purposes. While residential credits are most often given to individuals, commercial advances are given to business entities such as corporations, developers, and partnerships. These entities are often formed for the specific purpose of owning commercial real estate.Loan repayment schedulesThe debt for a residential mortgage loan is repaid in regular installments over a fixed period of time. This makes it an amortized loan.Unlike residential loans, commercial loans are paid over the course of 5 to 20 years from the day of procuring the credit. The amortization period is often longer than the term of the credit. The rates of interest the lender charges depends on the length of the loan term and the amortization period. The longer the loan repayment schedule, the higher the interest rates.Interest rates and feesCommercial loans are subject to higher rates of interest than residential credits. In addition, commercial real estate loans include fees that add to the overall cost of the loan. This includes fees levied on appraisals and credit application.Prepayment on commercial real estate loansIf investors settle the debt on their commercial loan before its maturity date, they will be required to pay prepayment penalties. These penalties are of 4 types:Prepayment penalty- This is calculated by multiplying the current outstanding balance by a specified prepayment penalty. It is the most basic of these penalties.Interest guarantee- The lender is subject to a certain amount of interest, even if the loan is paid off early.Lockout- The borrower is not allowed to pay off the loan before a certain specified period.Defeasance- This acts as a substitute for collateral. Instead of giving cash to the lender in exchange for their collateral, they give new collateral.In conclusion, residential and commercial real estate loans differ vastly from each other. When evaluating a business entities’ vie for a commercial real estate loan, lenders consider the loan’s collateral, the creditworthiness of the entity (owners), and the financial ratios.
Automobile Financing – Finding the Best Rates
Automobile financing can be complicated when you do not know where to look. There are so many options and you want something that is affordable. You can spend a great deal of time looking for affordable financing, simply because you are not looking in the right places. That is why you need to go to the best places to find your automobile financing.First, never get your financing from the dealership. Dealership use inflated rates and put confusing words in their agreements so you think you are going to get a better deal than you actually are. You will almost never get the kind of financing you want at a dealership unless they are offering 0% financing. Remember, though, that you will have to repay the loan in three years in order for that to work.You really want to look outside the dealership for financing. You will be able to get better terms, which will make the vehicle much more affordable.Your bank or credit union is a good place to start for vehicle financing. Often, you will be able to get great rates through your own financial institution. On top of that, they can automatically deduct your payments so you will never be late on a payment.When you choose your bank, it is easy to get a prime rate. That means you will save a great deal on interest.If you are not pleased with the rate offered by your bank, you can then go on the internet and browse financing options. Your best bet is to use a site that offers comparisons. You can then search for the lowest interest rate.When you do this, make sure you read all the fine print in the agreement. Also, go with a reputable financing company. If you have not heard of them, they might not be the company you want to go with.At the same time, there are several quality lenders you can find online. When you use one of them, you are likely to get a great rate. Therefore, you want to use the internet to shop for a rate.There are quite a few financing options available, so you do not want to go with one that is not a good deal. Take the time to look around so you can get good financing. It might take some time to find the financing you want, but it is well worth the time and effort once you find that perfect loan.Just keep in mind you want to be careful when it comes to financing. Always read the fine print and do not get locked into an agreement that is not fair. Analyze the agreement and be sure you completely understand it before committing to financing.With that in mind, you can start to shop for financing. You are certain to find some great rates if you keep your eyes open. Simply look around at all available options and pick the one that is best for you. You will then save money and have a loan you are happy with.