OFFICE BUILDING FINANCING

Office buildings are a great source of income. However, it is important to know the ropes if you expect your investment to be profitable. The more you know about office building financing, the better your chance of making a great investment.

The property should be located on a major thoroughfare with high visibility and easy access, or in an established office park. A good investor will look for locations in primary office markets or have the ability to compete at market rates. Can the space be leased again as needed? The investor must demonstrate that the property has solid market strength as determined by such factors as absorption and trends in population and employment. The property should exhibit a stronger market appeal than the competition. There should be a history of retaining its tenancy, sales volume and competitiveness.

There are some things to take into consideration when you are seeking office building financing. Most lenders will require three years of operating history. Rent revenue is typically taken from tax returns or contractual base rents. The ability to recoup expenses should reflect the operating history of the project to qualify for office building financing. Expenses are normally underwritten based on the last full fiscal year plus a percentage of inflation subject to industry averages.

Vacancy is another market factor that must be taken into account. The local market average or the vacancy rate for the last 12-month period has to be calculated. Properties that have a considerable roll-over risk are subject to scrutiny by lenders. Many lenders will consider this type of property on a case-by-case basis when an investor approaches them for office building financing.

What you actually pay for the property is not necessarily the value that a lender will place on the property. You should never pay more for an office building than what is justified by its annual gross operating income and subsequently the net operating income which is the net income after expenses. Most appraisers of office buildings put the emphasis on the income generated by the property. They also consider office property in terms of appreciation, location, and visibility to the general public. Lenders rely heavily on appraisals when the consider office building financing.

There are some important points to remember as you seek office building financing. You make your money on an investment when you buy real estate, not when you sell it. Just like in the stock market, if you buy too high, you will probably lose big when you try to sell. If you pay too much, the lender will only lend on the market value. You will have to make up the difference with a larger down payment.

Look for income property with good net operating income. You will identify this by the fact that the property will have a positive cash flow and a high occupancy rate. Buy the property on your terms at or below the fair market value.

Have the patience to wait for a motivated seller. Investors who pick up the bad habit of paying too much by buying from sellers who are not motivated will constantly be trying to make up the amount they overpaid. This will not only hurt your current status as an investor but will not play favorably with lenders when you apply for the next office building financing.

Office Building Loans

Office building loans are a specific type of commercial loan that are specifically for office buildings. Office building loans are generally financed through a commercial mortgage. This loan process can be confusing, time consuming, and frustrating. Office building loans are different from personal mortgages in a number of ways. One of the most significant differences is that it involves the financial history of the corporation or business. In some cases, the individual investors may have to submit their financial information as well. Regardless of the size of the property, the value of commercial real estate when compared to personal real estate is much higher.

Every good business needs available funds to operate. Banks and other lending institutions won’t just hand over money just because you ask. You need to show the bank that your business is solid and profitable. The bank will want to know how you will repay the loan, which means that you will need to have your financial records in order for the bank to review. Once the lender feels that your business is a good loan candidate, you can start working on the details of the loan.

There are several different types of loans to accommodate office building loans. One of the more traditional loan programs available is the Real Estate Purchase Loan. This loan uses the office building itself as collateral. It is available as a commercial and a governmental guaranteed loan. The rates on this loan are usually competitive and dependent on the loan to value of the building.

There are other types of commercial mortgages. You can apply for a fixed or amortized mortgage. You pay an equal amount each month, usually 15 to 25 years for commercial mortgages. At first, as much as 95% of each payment goes toward interest, but every month you pay a little more towards the principal until the loan is paid in full. A variable rate mortgage offers lower interest rates than fixed rate loans, but you are subject to fluctuating market conditions. Variable rates are riskier because you can not budget accurately for payments from month to month.

You might also want to consider an interest only mortgage or a mortgage with a balloon payment. “Interest only” simply refers to only making payments on the interest for the first three to five years of the office building loan. The goal is to reduce your monthly payments so that you can concentrate on improving your cash flow. The same is true of a mortgage with a balloon payment. This shorter term loan can range from 5 to 15 years. The smaller monthly payments allow you to use immediate cash flow to improve your business. The thing to remember here is that your business may not grow at the rate that you anticipate, but the balloon payment will definitely show up on time.

In addition to the traditional methods of office building financing, Bond financing is growing in popularity. There are only about a hundred lenders in the nation that specialize in this type of office building loan. Once the deal is approved, an attorney will write the bond. The bond is then sold to an investment banker. These bonds are typically sold to investors at a yield around the same amount as the 30-Day LIBOR.

It is important to review your credit score. Business credit is monitored through Dunn and Bradstreet and may be obtained directly from that organization. Doing your paper work is an important aspect of getting your office building loan.

SECURED BUSINESS LOANS

One of the best ways to own your own business is through a secured business loan. There are two types of business loans: secured loans and unsecured loans. The significant difference is that unsecured loans do not require any collateral and secured business loans do. The greatest advantage of using a secured business loan is the ability to negotiate longer loan terms and larger amounts. Some of the small business loans allow you to borrow money for up to thirty years. Many lenders will offer loans from $25,000 up to one million dollars. Secured business loans are part of many small business plans.

A secured business loan can jump start your business. You can invest in your existing business or you many use the money for a new start-up business. To get a secured business loan, you need to put your business or any other property up as collateral against the loan amount.

Before you take out a secured business loan, you need to plan your project and think about how much money you need to borrow. You need to have a good plan as to how you will repay the secured business loan. Remember, in case of default on the loan, the lender can repossess your property and sell it to get the outstanding amount of the loan.

Some of the benefits of secured business loans are: a low rate of interest, an easy repayment plan, a large finance amount, smaller and more flexible installments and the easy availability of getting the loan.

A secured business loan requires the borrower to put up assets as collateral to decrease the risk to the lender. Collateral, contracts, payment plans and uses of secured loans are things to be considered.

It is impossible to apply for a secured business loan without collateral. Collateral reduces the risk to the lender and can cause the borrower to forfeit his assets if he fails to make payments on his secured business loan. Collateral comes in the form of treasuries or agencies. This is considered highly rated collateral and is considered to be desirable. Having collateral means having assets and comes in many forms. Some common assets are cash, securities, inventory, real estate and vehicles. Long-term assets include real estate and equipment. Prepaid and deferred assets may be insurance, rent or interest. Intangible assets are such items as trademarks, patents and copyrights.

A promissory note is a legal statement saying you promise to pay a certain amount of money plus the interest that accumulates throughout the life of the secured business loan. The secured lending promissory note should be tailored to your situation. Secured business loans may carry higher interest rates in some states. Be sure to check with your lending officer to see how much you may be legally charged for your secured business loan. Some types of repayment plans include: lump sum repayment, periodic interest and lump sum repayment of principal, periodic payments of principle and interest, amortized payments and amortized payments with a balloon payment.

You might think about starting a business relationship with a secured financing lender before your business needs a secured business loan. By building a strong relationship, your business character will add to the probability of getting a secured business loan.

INDUSTRIAL BUILDING LOANS

Before you decide to seek an industrial building loan, prepare a short synopsis of your financing needs and your assets for presentation to a lender. Owning your own industrial building affords you the opportunity to grow far beyond that of leasing property. It provides your business with a large amount of equity which can increase the overall value of the business. This can be profitable should you decide to sell the business.

Owning your own industrial building puts your company in a stronger borrowing position. Remember, commercial real estate can be tied to a line of credit. This can allow contingencies for cash flow issues, expansions, or equipment repair or purchases. This type of investment property also provides your company with stability and longevity.

Lenders evaluating industrial building loans have many options. This is a broad category and finance programs vary widely based on such factors as loan amount or whether you will occupy the building yourself or have tenants. Environmental concerns can be a major factor and often slow lenders as the liability for contamination is high within the industrial building loan sector. The downside to owning includes the initial capital investment and you will be responsible for fixing and improving the business for yourself or your tenants.

It is a good idea to check with your lender prior to signing an offer of purchase. Check your documents to make sure that all of the lender’s conditions have been met. For example, the environmental and building inspection could reveal major work to be done which can sometimes be included as part of the loan. You can further protect your business’ cash flow by obtaining a complete quote for moving expenses and including it in your long-term financing. It can be very expensive for a company to move and install equipment at a new location.

Beyond the physical condition, there are some intangibles to consider. Building owners with tenants are vulnerable to sudden economic downturns. An under-occupied building can lead to financial hardships. Payment histories and tenant credit files need to be examined to determine the degree of risk involved. Tenant evaluation is not as important when seeking an industrial building loan as it is with other commercial properties, but it is still important. Lenders check the time left on the current lease and other relevant information. They will be most concerned about the time left on the lease. Some lenders will not lend you money beyond the term of the tenant lease. For older buildings, the insurance policy may contain a list of claims that have been filed, pointing out the building defects and potential problems.

There are things to consider when you are deciding to seek an industrial building loan. Return on investment (ROI) is the measuring rod that all investors should be using when they are entertaining the purchase of an industrial building. What return will you receive on the investment? The lender will want to know that you can repay the loan. What is the LTV or loan-to-value ratio which is the amount of debt as compared to the value of the property? The investor’s bottom line is the net operating income which is the gross income of the property less direct operating costs, but excluding depreciation, amortization and interest expenses. The NOI will dictate what industrial building loan the investor will receive and how much money he will have for his discretionary income at the end of the fiscal year.

Ownership of an industrial building can be risky, but if you follow the right steps in seeking that industrial building loan, you will be able to reduce that risk, profit from multiple revenue streams and grow your company.

HOTEL LENDING

The economic situation has brought some changes to the hotel industry and in particular to the hotel lending environment. Capital is scarce and deals are hard to close. Mortgage brokers are becoming very important in the hotel lending environment of today’s world. You need a mortgage and you don’t know how to proceed. Should you use a broker or go directly to a bank.

A bank is considered a direct lender. It is they who provide the money to the borrower at the closing table. In exchange, the hotel lender receives a note evidencing the borrower’s debt and the obligations to repay. The hotel lender also gets a lien on the property.

Mortgage brokers do not lend money. They are essentially a service provider who offers the loan products of several hotel lenders. A mortgage broker counsels you on the loans available from a wide variety of hotel lending sources. They will also counsel you during the qualification process if you have problems with such things as credit problems.

A few years ago, when hotel lending was very free and open, a broker was not as critical. Good real estate brokers who do hotels have relationships with hotel lenders. Now that financing is very difficult, they have these referrals to buyers to help them finance their assets. Well-connected brokers can contact various hotel lenders to find properties for buyers and make referrals.

A good broker will evaluate the deal and the buyer and sometimes make recommendations of hotel lenders. A savvy broker will make several recommendations and let the client make the contacts so that they can make up their own mind on selecting a hotel lender.

In today’s uncertain economic environment, certain transactions require lending from multiple sources. The minimum number for seeking multiple sources for hotel lending varies. There are some who feel that deals of more than $10 million dollars require more than one lender while others think that financing can be obtained from one hotel lender unless it is more than $20 million dollars. When you have to ask for deals over $20 million, you may have to deal with what is known as the “country club” effect. It may take two or three hotel lenders to handle the financing. This is a product of the recent economic fallout of the last 12 months.

A viable hotel lender has to pay attention to several other important details. Some of these areas demand the attention of hotel lawyers. Because hotels are going concerns that are situated on real estate, the hotel lender will obtain the security in the real and personal property as well as in all aspects of the operating business.

If there are other liens on the property, the hotel lender may need to get all other parties to subordinate their interest to that of the lender’s. If another lien holder were to remove beds, TVs, etc., it would have an adverse impact on the lender’s collateral and additional expenses to start up again could be prohibitive.

A hotel lender and their agents should review management agreements, franchise agreements, leases and other contracts such as liquor licenses and ownership structure of the hotel as it affects security in hotel revenues.

In evaluating the hotel as collateral, the operating business and the revenue stream it produces are critical aspects of collateral value. The physical plant, its geographic location and its position within the selected market segment, are factors to be considered.

These factors that are unique to hotels are fundamentals which should be examined by hotel consultants and appraisers. Hotel lenders are well advised to seek out these experts to help evaluate the property and the business. The cost of these services is usually paid by the borrower.

Commercial Business Loans

Your business success depends on your ability to secure adequate financing. Not having adequate funding is the most common reason a start-up business fails. One of the first things you need to do is to know where to look for funding. Be prepared to convince investors to fund your business. Before you start your search for a commercial business loan, consider how much money you will need, how will you spend the money, how you plan to repay the loan.

Start out by writing a business plan. You might already have a plan on how everything will play out, but the bank will want to know how its funds will help you. Assess the investment potential of you business concept before seeking funding. There is no secret formula for getting financing. Don’t limit yourself by trying to force the wrong commercial business loan. Your financing should fit well with your business plan.

No matter where you turn for capital, you will need to provide solid documentation. Be prepared with a solid business plan, cash flow projections, personal financial statements and tax returns. With the right paperwork, you can convince lenders and investors that you will be able to repay your commercial business loan.

Go through banks or credit unions if you can show that your business proposal is strong. These institutions issue commercial business loans with varying interest rates and maturity dates. Visit your Small Business Development Center. They can offer advice on how to make your presentation to bankers and direct you to banks that are start-up friendly. You might consider venture capital. Venture capitalists do not normally fund start-ups. They look to make large investments, usually over $1 million. The Small Business Administration licenses and regulates the Small Business Investment Company Program, which does make venture capital investments to start-up businesses.

Existing businesses need available funds to operate. Whether you’re are paying for raw materials or expanding into new markets, you may need a commercial business loan. But banks and other financial institutions won’t just hand over money because you seem like a nice person. You will need to show the bank that your business is well-run and how you will use the funds to achieve your goals.

As with any commercial business loan, the bank will need your paperwork. The financial institution will review these papers and see how well you have handled money in the past and whether you keep good records.

You should also know your commercial business loans. They come in many different shapes and you need to pick the one that works for you. Listen to the advice of your banker. He may have a different take on what you need than you do. The basic types of commercial business loans are term loans that are paid monthly, short term loans for a year or less, equipment financing, and open lines of credit where you take out money as needed up to a maximum amount per year.

Ask the loan officer some questions about all the topics related to the commercial business loan. Ask about the amount you will receive, interest, repayment terms, loan fees, restriction on the funds, and your responsibilities as a borrower. It is important to know all the aspects of your commercial business loan.

Commercial Construction Financing

Commercial construction financing is sought for the purpose of constructing a new building or renovating an existing building. Commercial construction financing is usually for very large amounts and can be difficult to obtain. Reliable financing is critical to the success of your construction project.

Commercial mortgages offer several benefits over renting property. One of the most significant benefits is ownership. Instead of just providing space for your business, your monthly payments now help build equity. This will help you in future undertakings such as expanding your business, buying new equipment or updating the property. Also, the interest is tax deductible, which lowers your company’s gross taxable income. Another advantage of commercial mortgages is that the loan is usually assumable. This means that if you decide to sell the property while still carrying the mortgage, a qualified buyer can take over the terms of your existing loan without needing to go through an extensive approval process.

Commercial construction financing is designed to pay for the development in stages. By providing collateral, usually by pledging the land, the lender will disburse funds according to the schedule of production for the project. We can discuss some of these forms of commercial construction financing.

A permanent loan is a long term first mortgage. Any first mortgage loan on a commercial property with a term of at least five years is considered to be a permanent loan. A 10 year term is about as long of a term as most commercial lenders will go. Permanent loans are usually amortized over 25 years. A takeout loan is a permanent loan that pays off a construction loan. After the building is completed and leased, you look for a lender that will give you a takeout loan to pay off your commercial construction lender. A takeout loan and a forward takeout commitment are not the same thing. A forward takeout commitment is just a very expensive letter that promises to deliver a takeout loan in the future if the property is completed according to plan and leased at the target rate.

You might also consider a mezzanine loan. Mezzanine loans are similar to second mortgages, except a mezzanine loan is secured by the stock of the company that owns the property, as opposed to the real estate. Mezzanine loans are fairly big. It is hard to find a mezzanine lender who will make a loan of less than $2 million. In addition, mezzanine lenders want big projects. If the commercial construction financing that you are seeking is not close to $10 million, you may have a hard time finding a lender.

An investor seeking commercial construction financing might look at taking out a bridge loan. A bridge loan is short-term financing which is expected to be paid back rather quickly by a subsequent long-term loan. It may also be called a swing loan or known simply as bridge financing. The typical commercial property bridge loan has a term of six month to one year. Many commercial lenders will grant the owner the option to extend for six months to one year for a fee of between a half-point up to two points. Commercial property bridge loans are usually paid off when the owner places permanent financing on the property.

Getting commercial property financing is a time consuming process. You must provide significant documentation, including all of your business records from the last three years. This may include income, rent rolls, business plans and other proprietary information. It will usually take about four months for all of the paperwork to be processed. Even after you receive the loan, you may still need to provide regular financial updates to the lender to demonstrate your financial stability.

Hawaii Commercial Loans

The beautiful state of Hawaii is home to many wonderful islands of tropical beauty. It is also a great place to find commercial funding. There are a lot of good business opportunities for finding properties to pick up and a lot of good real estate among the islands in Hawaii. Whether you are a small business getting started, or a larger business that is looking to grow and expand, Hawaii has something to offer every savvy business owner.

Interest rates in Hawaii are competitive and you should take some time to search over the real estate market to find the best deal that you can. You should be aware that rates can differ and that rates for commercial loans are changing all the time due to the market value and changing conditions in the market. The interest rates are set and followed by federal lending guidelines and any commercial broker and lender must adhere to these guidelines. You should be aware of the way that lenders and bankers approve loans for commercial purposes. One of the tools that they use is the loan to value ratio. This method is used in commercial lending and tends to be very conservative. Commercial lenders will typically require a minimum down of 20 percent of the purchase price at the time of the loan. The remaining 80 percent will then turn into the loan amount for the new property and the loan will be secured most often by the real estate that is being purchased.

Ocean front property in Hawaii is a big selling point for a lot of real estate agents and lenders. There are a lot of opportunities to find property in the way of apartment buildings and condos. There are a lot of people who have a time share property in Hawaii that they use part of the year and rent it out the rest of the time. Those kinds of properties are a good investment for a business. It can be expensive to find real estate in Hawaii, so if you are considering applying for a commercial loan, make sure that your business has enough working capital and a good cash flow that will leave the business still able to operate and pay the new payments on the loan.

Lenders and bankers will analyze your business and the credit history that it has. They look at how you have paid on your previous or current debts and loans and use that as a factor for approving you for a new loan amount. There are other kinds of commercial loans that you can take out to help cover expenses of your business and help with the day to day operations that it takes for your business to run. The terms of commercial loans are dependent upon the kind of commercial loan that you are applying for and also the amount of the loan. The more money that you can put down on the loan, the less that you will have to finance and you may be able to receive lower interest rates than if you have to finance over 80 percent of the loan. You can sometimes work with your lender or banker to see what you can do to get the best rates and terms possible on your loan to help you make the payments and establish good credit.

Utah Commercial Loans

Have you been thinking about finding a commercial loan funding source in Utah? If so, there are a lot of lenders and bankers that can help you get the funding that you need to make a new purchase for your business. Whether you are starting out with a new business or you are expanding your current business, there are a lot of opportunities in Utah.

One thing that you want to do no matter what size commercial loan you are applying for is to know what is going on with the market. One of the best ways to stay up to date on what is going on in the lending world is to do your own research and keep up on the latest articles and news in the market. The Internet is a very valuable tool when it comes to finding out the latest news, rates and terms that are happening in the market for commercial loans. Keeping up to date on new measures and bills that the Senate passes are a great way to ensure that you are going to know what you are getting into with your new commercial loan.

In addition to keeping up with National rates and trends, you should also be aware of the market conditions in your local area where you are looking to purchase the commercial property in order to make sure that you are making the best decision on where and when to buy the building and what the market value is in the area and how other similar properties and businesses are doing in the area. Utah has a vast market for real estate properties so you should be able to find a good one that is right for your business.

If you are concerned about being able to get approval for your new commercial loans, there are some things that you should be aware of as far as how lenders go about approving a commercial loan and what they look for. Lenders and bankers take a lot of factors into consideration and spend a great deal of time working with the figures and numbers to see if it will be a good deal for everyone. If the commercial lenders size up the situation and determine that the business has not been operating for an acceptable amount of time, they may need to obtain the financial documentation and credit ratings of all of the owners of the business as well. This can occur for most bankers and lenders if the business is fairly new and has not been operating for more than a couple years. This does not necessarily mean that if you are a newer business that you will not get a loan, it simply means that you may have to put more money down at the time of the loan, or you may have to have additional collateral to secure the loan with.

Having enough working capital and money to operate the business is another important thing that bankers and lenders look at. It can take a lot of money to keep a business up and running and you need to prove to the lenders that your business is strong enough to take on a new loan and use that money to help your business grow and succeed.

Commercial Loans in Alaska

The land of snow and ice has a lot to offer business owners who are looking to expand their business in the Alaska region. Whether you are looking to fund a commercial fishing expedition, or start up a business in the Alaska area, there are a lot of opportunities that are available. Lenders and bankers in Alaska work with business owners to help them get the funding they need for their commercial loans.

Depending on the kind and amount of commercial loan being applied for, lenders have different ways to calculate and determine the commercial lending rates and terms upon approving the loan. There are certain things that are always taken into consideration when approving a commercial loan that consist of the market value of the property if it is a real estate commercial loan, the financial information of the business which includes a full cash flow analysis, proposed business plan and other financial information that they need to gather to determine if the business qualifies for the loan. Loan to value is another tool that lenders and bankers use to determine if the property being purchased is equivalent to the amount of the loan that is being requested.

If you are thinking about purchasing an investment property, you should be aware that they are handled a little bit differently. Loans that are given on investment property are usually based on an individual loan basis, and each commercial lender has different criteria that are required to obtain an investment property loan. Loans that are given for the purpose of buying a rental property or apartment building are one type of loan and you can usually have longer terms on a loan of that size depending on how your business measures up and if you qualify for the amount of loan that is requested. In Alaska, there are a lot of different types of investment properties and business adventures that are available to choose from.

Because investment property loans typically have a lot more money tied up in them, there may be stricter or more stringent guidelines that commercial lenders and bankers will need to follow to make sure that the business is stable enough and has enough credit established to be able to afford the loan payments and not default on the loan. Over the past few years there have been a lot of loans that have gone bad and forced the owners to turn over the property to the bank as a foreclosure. When you are applying for a loan of a large sum of money you should first be sure that your business has enough credit established. In some cases, the individuals that are associated with the business may need to be on the loan and therefore it is important that the credit history of the individuals is also taken into consideration.

Alaska has a lot to offer any type and size of business and has lenders and bankers across the vast state that are available to help you get the commercial funding that you need to help your business grow and succeed. You can research different options that are available on the Internet and see what is available that may work well for your business and what you may want to consider about starting up a business in Alaska and taking on new ventures for your business.

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