Dennis Dahlberg - It Can't Get Better Than This!

Wednesday, March 21, 2018

Understanding the Logic behind the Process of Commercial Real Estate Loans

Getting approved for your first commercial mortgage can be a challenge. The best way to ensure a successful loan application is to have a good knowledge of commercial real estate loans.

There is a lot more to obtaining commercial real estate loans than you might first think. The process is more complicated and lengthy than even the most difficult residential home purchase. But because of the significant amount of money involved and the added risks, lenders are much more selective when it comes to approving an application.

Technically, commercial real estate loans are secured by liens on the property which is being purchased. That property is the lenders security and ability to recover their money if you default on the loan. But there are additional factors which make commercial real estate loans much more risky than a residential loan. First, commercial real estate values can fluctuate very rapidly. This can leave a lender repossessing a property which is worth far less than the remaining balance on the loan. In addition, the business which is purchasing the property has a greater chance than a consumer of suffering financial hardship as a result of a sudden change in the economy.

Because of the increased risk that the lender is facing, interest rates are higher and loan terms are shorter on a commercial loan than they would be on a consumer loan. Most commercial loans are for a ten year period or less as opposed to a residential mortgage which can range from 15 years to 40 years in some cases. And even with these shorter terms the interest rate for a commercial loan is about 1% higher. Commercial lenders also require a 20% down payment in most cases. This gives the added security that the property will always remain greater in value than the amount of the outstanding balance of the loan.

The Application Process

When applying for a home mortgage, borrowers must be able to demonstrate that they have the ability to afford the monthly payments and that they have steady income. Commercial borrowers much also prove that there is a means of making the loan payments. But because a business is more reliant on the overall economy, they must show that the business is in good financial health, that it is being managed well and that it has sufficient cash reserves to weather a financial down turn or hardship. In some cases, the owners must also include their personal financial documentation if the business has poor credit, no credit or has not been in operating for more than 5 years.

Understanding the Lending Process

All lenders are in business to make money. Understanding that fact makes it easier to understand why commercial lending can be difficult to secure. The increased risk that the lender faces needs to be rewarded with higher interest and shorter repayment terms. In addition, the lenders are more careful about the creditworthiness and the financial health of the borrowers. With the economy having a bigger impact on businesses, lenders want to verify that a business is stable enough to survive a short economic crunch or down turn in business. Know this information and creating a loan application package that demonstrates your financial stability will greatly increase your opportunities for commercial financing.

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Tuesday, March 20, 2018

Criteria for Selecting Commercial Lenders

Evaluating commercial lenders can be a difficult task. But preparing a list of criteria to use for selecting the best lender to meet your needs can be a great time saver.

As a business professional, both your time and your money hold a great deal of value. So it is important to find a lender who will meet all of your needs. Ideally, you will be able to evaluate enough commercial lenders to select a few to forge long term relationships with to ensure continued financial prosperity. The process will undoubtedly take some time but the long term benefit will be a good working relationship with a primary lender as well as other secondary reputable lenders.

Commercial lenders are all about money. You would not be seeking a commercial lender if you did not need money. But you should look at these relationships as you would any other vendor who is supplying a good or service to your business. You need to compare the merits or the service each lender is willing to provide to you. This means what type of fee structure are they offering, what is the interest rate and how quickly can they deliver on their product; your loan funding.

You will also want to evaluate the core qualities of the lenders existing clients. Do they cater to a certain industry or type of loan? Do they have a specific loan size that they tend to service? Are they familiar with your business and the type of loan that you are looking for? All of this information will help you to determine the level of responsiveness and the quality of the service that you will receive if you do business with the lender. Customer service might not jump out as an important factor when securing the loan but if you ever have an issue or want to restructure your loan, then customer service could be one of the most important features the lender offers. Think long term for customer service and product lines available. Meeting your long term needs with a single lender will save you a great deal of time in the long run.

Comfort and Compatibility

Think of your lender as a strategic partner. You will need to discuss confidential financial information as well as other proprietary information about your business. It is important that you are working with a lender with whom you have a certain comfort level. The more honest and up front you can be with your lender the more benefits they can provide to you.

Invest Time to Evaluate for Long Term Success

Creating a list of criteria to evaluate commercial lenders will require an investment of your time today. But the benefits will continue to reward you each time you complete a new loan from your lender or seek advice. Carefully consider the fees and interest rates associated with the different lenders, but also recognize the added value that customer service and fast response time can add to your relationship. Knowing that you have a lender who will meet all of your needs for the long term is worth the time involved in a careful selection process.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Key Differences between Commercial Loans and Residential Loans

Knowing the differences between commercial loans and residential loans will help you to understand the lengthy process when applying for a commercial loan.

Most consumers think that the process to apply for a residential loan is fairly in-depth and thorough. But if they were ever to apply for a commercial loan they would begin to look more favorably on the residential loan application and approval process. Because of the larger sum of money involved and the greater risk and volatility in the commercial real estate market, commercial loans and the application process can be very intense.

When a consumer applies for a mortgage, the lenders first concern is their income and its stability as well as their debt load. Consumer’s debt should be no more than 45% of their income. But commercial lenders are more interested in the ability of the property to generate income to pay the loan. This is called a Debt Coverage Ratio and lenders prefer to see the ratio at 1:1.25 at the least. This means that the income to cover the loan payments is relatively secure.

A down payment on a home is somewhat negotiable and in some cases is very, very small. But due to the increased risk associated with commercial loans, these down payments are normally 20%. This gives the lender the added security of knowing that the property is valued at 20% more than the initial loan amount. Even in the event that the borrower defaults early in the loan, chances are good that the property is still valued at the full payoff on the loan.

Time Is Critical for Commercial Loans

A normal residential mortgage loan can range from 15 years to 30 and some even stretch as far as 40 years. But a commercial mortgage loan rarely exceeds 10 years. This is because lenders want to decrease the risk of the loan by getting their money back faster. In addition, consumers can pay a mortgage loan off early and save some of the interest that they would have paid over the term of the loan. This is not the case for a commercial mortgage. And in fact, there can be penalties which must be paid called prepayment penalties. In more cases the penalty decreases the further into the loan you progress. But the lender wants to be sure that they make their desired profit, or earning, on each commercial loan they write.

Not Really Even Similar

A consumer mortgage and a commercial property loan are only similar in the fact that it is a loan to purchase property. The dollar amount of most commercial loans is substantially larger than the average home loan. In addition, commercial real estate values are very volatile and can change drastically and very quickly. This is an added risk for the lender. Due to these increased risks, lenders are much more particular about the loan applications which they approve and the terms for which they will offer the loan. Having a good understanding of the lenders approval criteria can save a borrower a great deal of time in completing lengthy commercial loan applications if they don’t meet the lenders criteria.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Process for Obtaining Commercial Loans

There is really no shortcut when you are seeking commercial loans. But following a tried and true process can help to expedite the response to your application.

Most borrowers fail to understand that a great deal of the success or failure of their commercial loan application rests on their amount of effort in preparation. There is a huge amount of research and due diligence that a borrower must invest in the process in order to be successful when applying for commercial loans. Understanding the loan application process, the desires of specific lenders and their loan approval criteria are all very important and should be researched long before you begin to search for a commercial property to purchase.

Many borrowers are in awe of commercial lenders and fail to see them as a business partner or vendor. They get too caught up in the “bank” aspect and feel as if they are being judged. The lender is making a judgement but only from the perspective that they want to verify that you can afford the loan. They are just making smart business decisions. In that vein, you should also be making smart decisions about who you are interested in borrowing from. There are many options for commercial loans which you should explore including large national banks, medium sized regional banks, a small local bank, a private lender or a mortgage company just to name a few. If you are not familiar with any major lenders or to gain information about your options, begin with a meeting at your current bank to learn about their commercial loan products.

Each lender is going to have a slightly different set of criteria for approving a loan. Learning these requirements can help you to determine which lenders you will actually apply to. Set up a few appointments to speak to loan officers to learn about the lenders and what they have to offer you. Be prepared to discuss your business, the reason you are requesting a loan and how you plan to meet the financial responsibility of repaying the loan. These conversations can glean some very helpful free advice for you from seasoned lending professionals.

Select Lenders Who Best Meet Your Needs

Not all lenders are going to be a great fit for you or even a fit at all. If you are looking for a small loan then a national bank might not be interested in your application. Likewise, if you are seeking a very large loan, then a small local bank might not be your best choice. Try to determine which lenders specialize in the type of commercial loans that you are seeking and then apply only to those lenders. There are costs involved in commercial loan applications as well as a commitment of time. Don’t waste either by applying to a lender who will not be interested in your business.

Make a Great First Impression

Other than a brief introductory meeting, your loan application will be your first contact with many lenders. This is your only opportunity to create a positive and professional first impression. Invest all of the time that you need to research your options and the criteria that each lender uses to evaluate loan applications. Only then should you begin to compile your documentation and complete the loan application. This dedication to completing a high quality loan application and documentation packet will pay great dividends when you learn that you have multiple loan offers at very competitive rates.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Sunday, March 18, 2018

Tips to Obtaining Hard Money Loans Fast

Hard money loans are used for short-term projects, usually ranging from as little as 30 days to 5 years. But these loans also come with higher interest rates. But if you need to get extra finances quickly, this type of funding is the right choice for you.

Fast approvals are usually quite easy when it comes to hard money loans. On top of quick approvals, these loans also come with high flexibility and less documentation is required for approval. Usually they are used as a last resort when unable to get a mortgage, but it can be well worth it.

If you are looking to finance a real estate investment, this type of funding is very beneficial in its own ways. The application process is much shorter compared to other loans. Financial history of course does play a role, but other factors come into play as well. Many lenders aren’t concerned with the present value. Their main concern is to see that in a short time, they will be able to make their money back on the investment, including interest.

Since lenders are looking more at the final project, making plans for the property plays a big part and can help you get hard money loans even faster. Most of the time, funding is provided in just a couple of weeks. But if need be, you sometimes can get the funds as little as just a few days, all depending on the lender and certain circumstances.

The first thing to do to obtain a loan quickly is to gather all of the important documentation.

Gathering all of the important documentation and information needed for lenders is one of the most basic factors for a speedy process. Things that lenders are looking for include: what kind of property you are looking to invest in (residential, commercial, industrial or land), the estimated value of the property, the requested loan amount and how the loan with be paid back (this includes the terms of loan, the length and monthly payments).

Not only is the process of getting funds quick, so is the application.

Unlike other loans, hard money loans come with much easier applications. In fact, the application is only 5 pages long. The entire process will even go quicker if you are able to present all of the information that the lender needs sooner rather than later. This is why organization of all of your documents and plans come in handy.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Saturday, March 17, 2018

Why There are Mixed Signals for Commercial Loans in 2018

Many are optimistic for 2018 to be a great year when it comes to commercial loans, but others are also preparing for some bad financial scenarios to hit this year.

The multifamily market on the west coast could be a cause for some concern. Rental rates have increased, causing the market to be unsustainable. Also, there is stiff competition among lenders, which leads to many dealing with commercial loans to expect an intense 2018 among lenders.

Because of this tough competition, lenders are starting to take more risks by approving higher-risk commercial loans. And if the market takes a turn for the worse, this could put many lenders in a bind. Even though signs do point to a stable 2018, lenders should be prepared in case of a sharp turn.

But the majority in the industry think that momentum from 2017 will carry over into 2018. They also this that not only will there be stability, but that the commercial industry could even see a 5 percent increase.

Many are optimistic for 2018, but some of the issues could be the start of a downfall in the market.

The issues with stiff lender completion and increase in rental rates could be the start of the marketing taking a turn for the worse. It might take a couple of years, but the impact could start in 2018. Especially if the issues continue or if new issues come up.

Some bad signs are also hitting office properties and retail stores.

More people are starting to work from home, which is becoming a bad sign for office properties. With people using their home as their office, there is no need for office spaces, which is leading to a higher vacancy. Retail stores are also starting to lay off more employees, which is another bad sign. That means that they could be on their way to going out of business, leading to the vacancy of even more spaces.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Why Commercial Loans Had a Successful 2017

The end of 2017 wasn’t quite the strongest quarter, but overall 2017 was a really good year for commercial loans. Just recently, Bank Financial Corporation released their impressive numbers from 2017 and many others in the industry shared the same success.

With a 20 percent increase from last year, Bank Financial Corporation recorded a net income of $9 million dollars. There was a decline in the 4^th quarter from previous years, but it was mainly due to accelerated payments and also prepayments of leases. On top of that, the reduction of wholesale deposits did cause a decline in total deposits in the 4^th quarter, but 2017 still saw an overall increase.

Commercial loans and industrial loans san an increase in $53.5 million dollars in 2017. Also, seeing increases, multi-family residential real estate loans increased by $45.5 million dollars and middle market commercial leases grew by $18.1 million dollars. Bank Financial Corporation wasn’t the only company that saw an increase throughout 2017. Many in the industry also saw just as impressive numbers when it comes to all the different types of loans.

It was a favorable year for Bank Financial Corporation set a new record with commercial related loan balances of $1.22 billion dollars. The total retail and commercial deposits didn’t grow, but it also didn’t decline either, leading to stability throughout the year. Stability isn’t the best scenario, but it is a lot better than seeing a decline. Which is why many in the industry are hoping that the numbers continue to increase or at least be stable as we continue into 2018.

Bank Financial Corporation thanks the positive trends due to a new organization structure.

With such a great year with accelerated growth with commercial loans, Bank Financial Corporation has given credit to the success to new key business plan objectives that they were able to execute for a successful year. The company is hoping to continue to improve and become more efficient throughout the new year. The company was able to organize their plans to successfully deliver the business that their consumers are looking for.

The momentum from 2017 is expected to continue through 2018.

Due to the successful year, Bank Financial Corporation has been able to obtain new customers, acquire new account types and even expand relationships with existing customers. Bank Financial Corporation is the holding company for Bank Financial National Bank, who currently have 19 offices across the United States and offer things like commercial loans.

Technorati Tags: commercial loans,commercial lending,commercial mortgage