loan options

 Its painfully well known that the past 3 years have now been difficult in the industry lending business. Borrower's commercial loan options have now been limited and most have now been difficult to close. We discuss the different commercial mortgage refinance options, which are available now and that is going to be for sale in 2012 below. You may not like what you read, but this is the reality of the market.

Refinance Options on Commercial Investment Properties

If you have a commercial investment property (I'm discussing NON multifamily properties, such as for instance office, retail, industrial, etc) you already know how hard it's been to locate banks and lenders which are interested in considering your loan request. Probably 80% of the banks on the market don't have any interest in funding investment property loans, regardless of how financially strong of a borrower you are (The main reason is how commercial real estate sits on banks balance sheets, but that's a different topic).

The good thing is that 2011 has seen a rise in the amount of banks and lenders which are ready to lend to commercial investors and for those that qualify the rates are outstanding. Here's the typical terms: Max 65% loan to value and this is with conservative capitalization rates of 8% or maybe more (Despite market conditions). Max 20 year amortization schedules. You might find a bank that might be ready to spread this out to 25 years but this really is rare.

Fixed periods are normally capped at 5 years, however 7 and 10 years are available, but the bump in interest rates is expensive. Minimum debt coverage ratio's has become 1.4 and this is with conservative underwriting line items such as for instance minimum vacancy of 7-10%, management at 4% and reserves at 2%. Bottomline is that the property needs to cash flow well. Unfortunately borrowers and their investment properties that don't fit the aforementioned, will struggle to locate loan options.

Owner User Commercial Properties

If your business occupies significantly more than 50% of your building, than your loan options open up considerable and the degree of competition between banks is picking up. The best way to make sense of the different loan programs is to divide them between conventional loans and government backed loans including the SBA.

Conventional lending that was very limited as much as 12 - 9 months ago is finally picking up. In the event that you fit this box, expect great rates and closings in as low as 30 days. Terms are the following: 65% (Maybe 70%) max loan to value. 15, 20 or 25 year amortization schedules. Fixed rates from 1, 3, 5, and 10 years. Rates are in the 4%'s to low 5%'s on 5 year fixed programs. Minimum debt coverage ratios of 1.25 with stable gross sales.

If your loan to value is higher than 65% and or when you yourself have a particular use property such as a funeral home or restaurant, etc you'll want to look harder at the SBA programs. And regardless of the bureaucracy of the SBA loan process, it's literally been living saver of 1,000's of small businesses over the country.

Expect 90% loan to value, again 90% loan to value financing with either the SBA 504 or SBA 7a programs... No other loan programs offer this most of leverage. Borrowers that purchased their property many years ago and have experienced a decline in value will see that this really is their best potential solution. Rates on the 504 loan are really low and you can expect 3, 5, 10 and even 25 year fixed rates. For borrowers that need to consolidate other debt or secure working capital the SBA 7a loan is another solid option. These two loans will remain a favorite and viable option loan options.

2012 will more than likely see a moderate increase in the amount of banks and loan programs that become available for commercial mortgage refinances. Loan to values will more than likely not increase because the capital ratios for banks are not going to loosen per the Fed's rules. The European debt crisis will even have a major affect banks in the 2012.