LOAN OPTIONS TAILORED FOR YOU
Growing businesses need a little help in taking advantage of opportunities when they present themselves. If you need to purchase new equipment, bolster your inventory, or just need to smooth out your seasonal cash flow, we can help you find the right solution.
CMBS CONDUIT LOANS
CMBS conduit loans are conventional fixed-rate, first mortgage loans secured by stabilized income-producing commercial real estate properties that are leased to tenants. Once closed, CMBS conduit loans are pooled together by Wall Street investment banks and sold as securities to investors. PBCLA can review your choices and help you decide which program is best for you.
CMBS CONDUIT LOAN BENEFITS
The two most compelling benefits of CMBS conduit loans are:
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All CMBS conduit loans are non-recourse (with no personal guarantees), and
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CMBS conduit loans allow for unrestricted cash-out on refinances. This can allow you to utilize the equity in your property for other projects.
For example, if a shopping center worth $15 million is refinanced with a 70% loan-to-value CMBS conduit loan ($10.5 million) and the existing loan balance is $7 million, the $2.5 million of excess loan proceeds are provided to the borrower without restriction on what the excess funds can be used for. Most traditional lenders do not allow for unrestricted cash out.
In regard to non-recourse, most commercial lenders require that a commercial loan be 100% guaranteed personally by all of the individual owners of the property. In the event of a default and foreclosure, if the lender does not recover the full loan balance through a sale of the property or the loan, each individual is personally responsible to repay the shortfall, and the lender can easily get a judgment to compel the individuals to pay. With a CMBS conduit loan, the individuals do not have any personal liability to repay the loan in the event of default and foreclosure.
All CMBS conduit loans are fixed-rate and have a 5-, 7- or 10-year loan term. CMBS conduit loans amortize on long 25- or 30-year schedules and can have interest-only payments during the first few years of the loan term. CMBS conduit loans close fast — in as little as 30 days — and all CMBS conduit loans are assumable.
CMBS conduit loans can be approved and closed with borrowers who have credit blemishes such as prior loan defaults and property bankruptcies as long as the individual who owns the property being financed through a CMBS conduit loan did not act in “bad faith.” In addition, individuals with poor personal credit scores can qualify for CMBS conduit loans because the underwriting and approval for a CMBS conduit loan is based primarily on the income from the property being financed, not the credit of the individual owner.
SBA AND USDA LOANS
WHAT ARE THE TWO PRIMARY GOVERNMENT GUARANTEED LOAN PROGRAMS?
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SBA 7(a)
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USDA Business & Industry
The SBA 7(a) program provides a 75% guarantee to SBA approved lenders to encourage lenders to make, refinance, or purchase loans secured by owner-occupied commercial real estate that would be considered too risky to close without the guarantee. For additional information on SBA 7(a) loans, visit https://www.sba.gov/blogs/sbas-7a-loan-program-explained.
The USDA Business & Industry program provides an 80% guarantee to USDA approved lenders to encourage lenders to make commercial loans in rural areas (as defined by USDA rules). To check your project location eligibility, visit https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=rbs.
For additional information on USDA B&I programs, visit https://www.rd.usda.gov/programs-services/business-programs/business-industry-loan-guarantees.
WHEN ARE SBA/USDA LOANS A GOOD FIT?
SBA loans are a good fit for owner-occupant borrowers seeking to purchase commercial real estate while providing the least amount of down payment. The USDA/SBA 504 and SBA 7(a) programs allow for lower down payments and longer amortizations than traditional financing. This results in lower payments which can help the properties cash flow in the early years.
In addition, the SBA 7(a) program is useful for owner-occupant borrowers who have had their loan requests turned down after applying for traditional loan.
Visit our Peoples Bank SBA/USDA site to learn more at peoplesbanksba.com.