Financial and Credit Blog

Commercial Loans: the Power of Permits

August 3rd, 2009 at 11:51pm Under Commercial Loan

I’ve had real incentive to consider this week’s topic: How permits affect commercial loan underwriting. Those of you in the business for a while have undoubtedly come across an apartment project, office, or retail project with “un-permitted” additions. To be clear, “un-permitted” work on a property is work that was done without the local city building and safety department knowing about it. Even though it may have been done to the latest code, it was done without the local authority’s blessing.

When you ran into that property with un-permitted work, you may have been initially surprised to learn that lender involved disallowed any income or value attributable to those improvements. I’ll also bet that it didn’t make a lot of sense to you. The tenant was there, the square footage was there, the lights worked, the toilets flushed … why wouldn’t it count?

The theory goes something like this: The city has the right, once it learns about the un-permitted work, to require the owner to provide access to city inspectors to all of the improvements done, whether or not the current owner did the work! This particularly applies to any building safety related work such at plumbing, electrical, and structural. So if the city required that of an owner, it means that walls get broken into, floors get jack hammered, and life around the un-permitted work generally becomes hell.

If there happens to be a tenant … who pays rent … around this work, then it’s not altogether unreasonable to assume that rent might stop and for a potentially long time! It’s possible that the un-permitted work could be disallowed entirely. This would mean less income for the property, potentially putting the lender’s loan in jeopardy. The moral of the story: Before taking on a property with un-permitted improvements, make a stop at the Building and Safety office of the local city to find out what is allowed and what the “re-permitting” process will entail. It could save you thousands of dollars.

The Amount That A Commercial Bank Can Lend Is Determined By Its?

August 3rd, 2009 at 12:29pm Under Commercial Loan

-required reserves.
-excess reserves.
-outstanding loans.
-outstanding checkable deposits.

Commercial Loan- Get Maximum Benefit Out of It!

August 3rd, 2009 at 11:51am Under Commercial Loan

Fixed Commercial Loan is similar in nature like residential Loan. In residential loan you have to pledge real property as guaranty. When you use such loan for raising fund for business or to buy property, the lender keep hold of interest to that property till loans fully repaid. Repayment period can be your choice, start from short to longer duration.

Principal and interest part of advance recovered by lender throughout life span, on being defaulter, the lender has right to foreclose and take possession of the property that has kept as guaranty. You should aware that interest of loan is tax deductible and income from such advance is considered as non-taxable. But be sure that tax penalty can be severed. You should assure that funds were not used for any qualified business purpose or for any tax saving purpose.

If you take loan for business and not for buying property, lender may re-finance your current borrowed money to level that you are in need, or lend only the difference between current value of business property and amount that you are debt on current loan.

For commercial loans, two types of interest schemes prevailed. Fixed rate business credit, where interest rate that is in place either for life of credit taken or for fixed time duration. If chosen fixed period of time then, converted as variable interest rate after fixed time period expires.

Read carefully contract document about ERC (Early Redemption Charge), as this clause states, if you pay off the note prior to the end of fixed rate period, the lender is entitled to one-time lump fee to offset their loss of expected income. Sometime ERC may be extended to longer period, up to entire term of financed money. Now-a-day competition among lenders, you negotiate about ERC term to drop.

Variable interest rate applicable, based upon rate issued by Bank of England. Lender states that rate consists of published rate and will likely to go up or down over its life span, it may have some pre-determined premium that remains same for full term of advance taken. You must aware how frequently rate is changing and you shall happy with amount charged. You should negotiate about both of these factors to lender.

It is dynamic situation for selection about type of interest. Fixed rate business credit is good choice in situation when interest rates likely to go upwards, if economic indicator point to downtrend, then variable rate is best choice.

For maximum benefit, keep on changing, i.e. if you choose fixed rate and interest rate dropped down, consider for applying re-finance and apply for variable interest rate for lower rate advantage. If situation reversed, then move into fixed rate to protect you.

Your Story Of Funding Commercial Deals ?

August 3rd, 2009 at 07:12am Under Commercial Loan

Ive been a broker for residential loans and now I have my first commercial deal & it’s a new construction for a retail space. , I’ve learned, I’ve asked around and read some books, magazines and got some good resource from the net, and talked to lenders as well… but it’s never enough. I’d like to hear some stories how did anyone start from application to funding this type of multimillion dollar loans.. if anyone cared to share.. thanks

I Aim To Be A Commercial Pilot But The Training Is Too Expensive?

August 3rd, 2009 at 06:27am Under Commercial Loan

it takes around 20 to 22 lakhs.generally scholarships are for the sc/st’s.we cant even take such huge loan.i need to know if there is any way we can get scholarship or anyway by which i can earn around 7 lakhs in the next 2 years i have…i just passed my class 10th..i really an to go for it but dont want my parents to be burdened because of it…

With An Annual Income Of $30,000, How Much Would Capital Gains Tax Be On The Sale Of Commercial Real Estate?

August 3rd, 2009 at 01:45am Under Commercial Loan

Sales price $850,000. Loan balance $50,000. Owned property for over 5 years.

Anyone See That Commercial For 16 Week Cash Advance Loans?

August 2nd, 2009 at 07:41pm Under Commercial Loan

Normally, I would never use one of those check cashing places, but since we’ll be paying it back right away I’ll give it a try. The other day, I overheard a commerial on TV advertising 16 week loans, but I can’t remember the name of the place. It’s not an online thing, it’s an actual store. Anyone remember which place that is?

I Need A Mortgage On My Home That Is Commercial Zoned…please Help Soon! Thank You!!?

August 2nd, 2009 at 06:28pm Under Commercial Loan

I am looking for a mortgage on a home that is currently residential, but, zoned commercial.
I need help trying to find a company to loan money to me on a home that is commercial zoned looking for a mortgage on a home that is currently residential, but zoned commercial – the house is my home.
I need to find a company that can do a mortgage on my home that is zoned commercial.
I also would like this company to include the appraisal in with the mortgage. I understand it makes loans and appraisals difficult when a home is commercial zoned and not residential. It is impossible to get a letter of rebuild for my home too.
Please help soon. Thank you.

Macroeconomics: Commercial Banks In The United States Create Money By?

August 2nd, 2009 at 07:41am Under Commercial Loan

Commercial banks in the United States create money by:
A. Converting checking accounts to saving accounts
B. Printing new currency
C. Issuing loans
D. Replacing worn-out currency
E. Selling bonds

For A New Us Immigrant With 10 Yrs In Commercial Banking, What’s A Good Way To Get Into A Similar Job Market?

August 2nd, 2009 at 01:44am Under Commercial Loan

Has general management skills, loan recovery and other experience – but does not know about US taxation systems and law and other pertinent knowledge (what more is required?)