Commercial Real Estate Loan Strategies – The Value of Using Stated Income

The use of “Stated Income” (no tax returns and no income verification) commercial loans is a critical strategy to avoid several commercial mortgage loan problems. For example, many borrowers will simply not qualify for a commercial real estate loan if tax returns are used due to high business expenses (and low net income). This article will describe what differentiates a Stated Income business loan from a conventional or traditional business loan.

Very few traditional banks use Stated Income for a commercial real estate loan. Many/most commercial lenders will perform a thorough income verification as part of their underwriting process. Most non-traditional commercial lenders do not require tax returns or any income verification for a Stated Income commercial loan. Traditional bank commercial loan underwriting conditions will typically include copies of tax returns as well as a requirement to sign IRS Form 4506 which authorizes the lender to obtain tax returns directly from the IRS. Some lenders require this form in addition to current tax returns. The more devious use of this form is when lenders make a point of not requiring tax returns but separately ask the commercial borrower to sign this form. The most common explanation in asking for this form will involve the words “routine request”. This will usually occur just before the final closing and be further characterized as “one final small detail”. In reality IRS Form 4506 is neither “routine” nor a “small detail”. The use of this form is a lending practice that can have a potentially detrimental impact on a commercial borrower’s financial interests. In contrast, for most non-traditional commercial lenders, IRS Form 4506 is not required for their Stated Income business loans.

The value of using Stated Income does not end when the commercial loan closes. Many/most traditional banks require income verification/audits even after the commercial real estate loan closes. Most commercial borrowers won’t believe this until it happens, but many traditional commercial loans will have covenants stipulating that the lender must receive financial data even after the loan closing and that the loan can be recalled (forcing the commercial borrower to pay the bank back early) if the audit of this data is not satisfactory to the lender. Most non-traditional commercial lenders do not verify income either before or after the Stated Income commercial loan closes.

I have prepared a Special Report entitled “The Top 5 Reasons that Banks Decline Business Loan Applications and the Top 5 Strategies for Converting a Declined Loan into an Approved Loan”. One of those five reasons is that loan underwriters find something on a tax return that disqualifies a borrower under the bank’s lending guidelines. This “something” will frequently be insufficient net income, but when loan underwriters look at tax returns, there are many other possibilities which produce a similar result. If the commercial borrower is applying for a Stated Income business loan, this situation will not occur because tax returns will not be included in the commercial loan underwriting process.

Many commercial borrowers should be interested in strategies for preventing a lender from obtaining their tax returns directly from the IRS or preventing a lender from forcing a long-term loan to be repaid early. Stated Income commercial real estate loans provide a viable commercial financing strategy to alleviate concerns about these issues. Stated Income business loans are no longer just a strategy to help a commercial borrower that could not obtain a commercial loan any other way. Stated Income commercial loans are now increasingly viewed as a a vital method to protect the commercial real estate borrower’s overall financial interests, both before and after the loan has closed.

Financing Films – Use Your Tax Credits For Film Cash and Working Capital

Despite several major positives on the 2010 horizon financing films, the job of getting film cash and working capital is still a challenge for Canadian productions. Utilizing your tax credits in a creative and timely fashion is one method of raising capital in three of the main entertainment segments in Canada; they include film, television and digital animation credits.

Owners of productions in these segments can be forgiven for feeling lost or having difficulty in moving a production forward.

The challenge is even keener when as an owner of creator of a production you don’t necessarily have the ability to finalize distribution or pre – sales in today’s complex global environment. More than ever it is necessary to align yourself with a trusted, credible and experienced advisor in this unique business and financing area of the entertainment industry.

Let’s focus on how you can in a straightforward yet creative way ensure that you are maximizing capital, and cash flow via the utilization of the current generous tax credits available in Canada. When you think of the various sources of financing for your production you should always consider tax credits, and the financing of them, as a key source of film financing and film cash. And as we noted, this applies to both televison productions as well as digital animation, which is fast coming up from the rear as a major entertainment and business segment in the industry.

Tax credits should be an integral part of your overall financing strategy, and we clearly need to emphasize the need for an overall ‘strategy ‘in order to get your project completed. Identifying your tax credit financing partner will assist you in raising valuable capital and eliminating potential financing gaps in your production.

A reputable tax credit financing advisor will help you navigate the maze of financial organizations that participate in financing of your tax credits – these include independent finance firms, private funds, and in some cases organizations related to accountants and lawyers in the industry.

Many Canadian production owners do not realize the financing of your tax credits can be done at two different times in the life cycle of your project. Naturally once your credit has been filed and certified it is financeable at that time – generally we can say that you can received from 60-80% of the tax credit value in immediate cash and working capital, allowing you to recover a significant portion of your expenses. If we use 40% as a broad guideline (it varies between type of tax credit and type of production) you can see the cash flow and working capital power that immediate capital brings to your production.

However, did you know that in many cases you can receive a type of pre- financing for your tax credit? This allows you to generate often needed working capital immediately after it has been determined that you have an eligible project, as well that its ability to be properly document re budgeted expenses and ‘ points ‘ required to be properly certified.

Your ability to present a proper financing plan, demonstrate a realistic budget, and ensure that you have a team in place to document all that can generate a major part of your initial financing. Pre-financing of such a tax credit could often achieve immediate financing of at least 40% – if not more, in upfront working capital. Those funds, in connection with your other resources are often what can take the financing of your project to the goal line.

Take Back Productivity With Equipment Financing Leasing in Canada

Yours customers have heard the news – you have invested in new assets to better serve their needs and demonstrate your firms long term commitment to their business. That’s a clear, however intangible, benefit of equipment financing leasing in Canada.

The ability to increase production or streamline your business processes is often served by asset acquisition – acquiring those assets via a lease financing option is clearly the smart thing to do.

Competition is heating up everywhere, locally, nationally, and of course globally. That’s why your ability to invest in new assets such as production equipment, computer technology, business equipment, etc will put you at the top of the pile when it comes to today’s highly competitive environment.

Investing is always a long term strategy, so it is necessary to finance long term assets with a finance strategy such as equipment financing leasing – you are matching the long term benefits you will achieve through the assets with a same long term financing strategy. Your accountant calls that ‘ matching means to your needs ‘ – Intuitively to you as a business owner it’s simply cash flow 101!

It clearly does not make sense to any Canadian business owner or financial manager to pay cash and deplete cash flow and working capital resources and then to only receive the benefits of that cash outlay over a longer period of time.

Many of the production assets that we see clients acquire come from either the U.S, Europe, and in some cases even Asia. The 2010 strong Canadian dollar lends itself to strong buying power based on the currency and the willingness of the foreign suppliers to make sales.

When we thing of shop floor and production equipment we think of long term assets that will have a very useful economic life – in many cases they will even hold a residual value many years ago. But then… theres computer and technology. Those assets cost a lot, depreciate quickly, and as they become more and more productive that is offset by the need to constantly upgrade – think servers, pc’s, laptops. Etc. Once again, equipment financing leasing to the rescue! Your ability to upgrade, replace, or extend current leasing of technologies is enhanced by a lease financing option. And think of those cash flow advantages. We pity the poor Chief Information Officer at medium sized and larger firms that constantly must wrestle with capital expenditures in such large and constant amounts.

We all here about ‘crunching the numbers’ – in leasing, with the aid of a financial calculator you can very quickly identify budgeted amounts and cash outflows. There are only 5 simple parts of an equipment lease calculation- the term of the lease, the interest rate, the value of the equipment, the end purchase option, and of course the payment. Knowing any 4 of those allows you to quickly calculate the final remaining piece of the puzzle in your budgeting scenarios.

One of the greatest financiers of all time, J P Getty is often quoted as saying – ‘if it appreciates buy it, if it depreciates, lease it’. That’s the strategy you probably should adopt on every asset acquisition, and utilizing the variety of equipment financing leasing options is the common way to approach that lease versus buy decision.

Speak to a trusted, credible and experienced Canadian business financing advisor that will help you achieve and overcome your obstacles to competitive innovation.

7 Critical Business Financing Mistakes

Avoiding the top 7 business financing mistakes is a key component in business survival.

If you start committing these business financing mistakes too often, you will greatly reduce any chance you have for longer term business success.

The key is to understand the causes and significance of each so that you’re in a position to make better decisions.

>>> Business Financing Mistakes (1) – No Monthly Bookkeeping.

Regardless of the size of your business, inaccurate record keeping creates all sorts of issues relating to cash flow, planning, and business decision making.

While everything has a cost, bookkeeping services are dirt cheap compared to most other costs a business will incur.

And once a bookkeeping process gets established, the cost usually goes down or becomes more cost effective as there is no wasted effort in recording all the business activity.

By itself, this one mistake tends to lead to all the others in one way or another and should be avoided at all costs.

>>> Business Financing Mistakes (2) – No Projected Cash Flow.

No meaningful bookkeeping creates a lack of knowing where you’ve been. No projected cash flow creates a lack of knowing where you’re going.

Without keeping score, businesses tend to stray further and further away from their targets and wait for a crisis that forces a change in monthly spending habits.

Even if you have a projected cash flow, it needs to be realistic.

A certain level of conservatism needs to be present, or it will become meaningless in very short order.

>>> Business Financing Mistakes (3) – Inadequate Working Capital

No amount of record keeping will help you if you don’t have enough working capital to properly operate the business.

That’s why its important to accurately create a cash flow forecast before you even start up, acquire, or expand a business.

Too often the working capital component is completely ignored with the primary focus going towards capital asset investments.

When this happens, the cash flow crunch is usually felt quickly as there is insufficient funds to properly manage through the normal sales cycle.

>>> Business Financing Mistakes (4) – Poor Payment Management.

Unless you have meaningful working capital, forecasting, and bookkeeping in place, you’re likely going to have cash management problems.

The result is the need to stretch out and defer payments that have come due.

This can be the very edge of the slippery slope.

I mean, if you don’t find out what’s causing the cash flow problem in the first place, stretching out payments may only help you dig a deeper hole.

The primary targets are government remittances, trade payables, and credit card payments.

>>> Business Financing Mistakes (5) – Poor Credit Management

There can be severe credit consequences to deferring payments for both short periods of time and indefinite periods of time.

First, late payments of credit cards are probably the most common ways in which both businesses and individuals destroy their credit.

Second, NSF checks are also recorded through business credit reports and are another form of black mark.

Third, if you put off a payment too long, a creditor could file a judgement against you further damaging your credit.

Fourth, when you apply for future credit, being behind with government payments can result in an automatic turndown by many lenders.

It gets worse.

Each time you apply for credit, credit inquiries are listed on your credit report.

This can cause two additional problems.

First, multiple inquiries can reduce you overall credit rating or score.

Second, lenders tend to be less willing to grant credit to a business that has a multitude of inquiries on its credit report.

If you do get into situations where you’re short cash for a finite period of time, make sure you proactively discuss the situation with your creditors and negotiate repayment arrangements that you can both live with and that won’t jeopardize your credit.

>>> Business Financing Mistakes (6) – No Recorded Profitability

For startups, the most important thing you can do from a financing point of view is get profitable as fast as possible.

Most lenders must see at least one year of profitable financial statements before they will consider lending funds based on the strength of the business.

Before short term profitability is demonstrated, business financing is based primary on personal credit and net worth.

For existing businesses, historical results need to show profitability to acquire additional capital.

The measurement of this ability to repay is based on the net income recorded for the business by a third party accredited accountant.

In many cases, businesses work with their accountants to reduce business tax as much as possible but also destroy or restrict their ability to borrow in the process when the business net income is insufficient to service any additional debt.

>>> Business Financing Mistakes (7) – No Financing Strategy

A proper financing strategy creates 1) the financing required to support the present and future cash flows of the business, 2) the debt repayment schedule that the cash flow can service, and 3) the contingency funding necessary to address unplanned or unique business needs.

This sounds good in principle, but does not tend to be well practiced.

Why?

Because financing is largely an unplanned and after the fact event.

It seems once everything else is figured out, then a business will try to locate financing.

There are many reasons for this including: entrepreneurs are more marketing oriented, people believe financing is easy to secure when they need it, the short term impact of putting off financial issues are not as immediate as other things, and so on.

Regardless of the reason, the lack of a workable financing strategy is indeed a mistake.

However, a meaningful financing strategy is not likely to exist if one or more of the other 6 mistakes are present.

This reinforces the point that all mistakes listed are intertwined and when more than one is made, the effect of the negative result can become compounded.

Corporate Financing – Educational Training Program Options

The financial status of a business or organization is extremely important to their success. Students can step into corporate finance schools and degree programs to exclusively study how to work with businesses in this capacity. Educational training program options for corporate financing are available at several levels.

The financial activities of a corporation have to be monitored and managed in order to keep a concise record of all monetary funds. Training teaches students to properly work with finances to ensure stability and minimize any risks associated with spending and investing money. Educational programs are widely available at the bachelor’s, masters, and doctorate’s level of education. Programs at the bachelor’s degree level offer training specifically for corporate financing. Students that desire to pursue an advanced degree at the graduate level need to enroll in a finance program with a concentration in this field.

International marketing, accounting, financial reporting, and organizational psychology courses are some main topics studied in a bachelor’s degree program. Students will find that most programs award Bachelor of Science degrees that take approximately four-years. In this introductory program, common courses may include:

*Intro to Corporate Finance

Students study the roles of professionals, which include management and investment decisions. Students learn how businesses raise money for different investments and what risks are involved within that process. Subjects such as valuation, financial strategy, venture capital, and dividend return are all explored through a course like this.

*International Corporate Finance

Financing is explored for businesses that have international work. Students study the procedures for global investment and finance. The management of finances inside today’s high global competitiveness is examined as students learn about multi-national budgeting, debt service, and interest rates. The finance practices of America are contrasted with Europe and Asia.

*Financial Strategy

The evaluation and prospects of a finance strategy are extremely important to ensure success. Students will work through topics that explore how major investments are made. The calculation of risk and the chance for monetary growth are main areas studied within this type of course. The ability to create and implement a financial strategy that is competitive is also learned.

Several career opportunities are open to students that complete a bachelor’s degree program. Students can step into positions as stockbrokers, fraud investigators, investment bankers, and financial reporters. Each of these career options train students to work directly with corporate financing.

Further education at the graduate level provides students with advanced skills and knowledge that helps them obtain executive careers. Many areas such as real estate, risk analysis, valuation, and record keeping are looked at to prepare students for the field. Different markets and global organizations are also discussed. These finance areas are typically explored through different concentrations. Major curriculum areas can include revenue optimization, financial engineering, and international monetary policy. Becoming a bureaucrat, auditor, or a professor are all career options for students that finish graduate training.

Business Cash Advance Strategies – Ten Problems to Avoid With Credit Card Receivables

Even thriving small businesses frequently need more cash than they can borrow from a bank. One of the least-known commercial financing strategies for small businesses is potentially the best strategy to quickly obtain needed cash for growing their business. This commercial financing strategy uses an under-utilized business asset (credit card receivables) to obtain business cash advances based upon a merchant’s sales volume. These business cash advances typically vary from $5,000 to $300,000. Small businesses will frequently benefit from converting future cash flow into immediate working capital. The most likely candidates to benefit from this strategy are restaurants, bars, service businesses and retail stores.

This strategy is also known as “credit card factoring”. Many small businesses have relied upon a commercial financing strategy called “receivables factoring” which allows them to sell their future receivables at a discount. Most small businesses cannot adequately document their receivables in order to qualify for this kind of commercial financing. Many other small businesses (such as restaurants, bars, service businesses and retail stores noted above) simply do not have such receivables to rely upon as a commercial financing tool.

What these businesses do have in many cases is documented sales volume and documented credit card sales activity. It is this documented level of sales volume and credit card sales activity that becomes a financial asset to the business. Business cash advances up to $300,000 can be obtained based on a merchant’s sales volume and future credit card sales.

Before employing this strategy, small businesses should realize that there are several recurring potential problems that they need to anticipate. Ten common problems that small business owners should avoid when employing this strategy are highlighted below. Preferred/Recommended business cash advance requirements are shown in parentheses after each potential problem.

Up-front fees (Preferred/Recommended: No up-front fees)
Closing costs (Preferred/Recommended: No closing costs)
Financial Statements required (Preferred/Recommended: Financial statements not required)
Collateral required (Preferred/Recommended: Collateral not required)
Fixed term to pay off the business cash advance (Preferred/Recommended: No fixed term for repayment)
Fixed payments to pay off the business cash advance (Preferred/Recommended: No fixed payments)
High credit scores (680 to 700 or higher) required to qualify (Preferred/Recommended: Credit scores of 500 or better)
2-3 years or more in business required to qualify (Preferred/Recommended: 1 year in business)
12 to 24 months of documented credit card sales of $10,000 to $25,000 or more required (Preferred/Recommended: 6 months of $4,000 or more)
Maximum business cash advance of $10,000 to $50,000 (Preferred/Recommended: Maximum cash advance of $250,000 to $300,000)

Not all of these potential problems will be relevant to each commercial borrower. Most commercial borrowers will encounter at least 2-3 of these problems if they are reviewing business cash advance programs that use credit card receivables as the basis for obtaining short term business loans. It is not necessary to accept any of these problems in order to obtain business cash advances based on future credit card sales. There are viable credit card receivables programs which avoid all of the problems described above.

Canadian Equipment Financing Strategies

Getting the best Canadian equipment financing business funding and lease rates isn’t as difficult as you might think if you’re well informed. Canadian business has always regarded business equipment financing as a solid choice for asset acquisition.

When you consider an asset finance decision your alternative usually tends to be a bank loan. Banks obviously have the best financing rates in Canada but did you know that the banks themselves don’t offer equipment leasing. A few have specialized subsidiaries that do offer this type of financing, but in general you need to know that if you are focusing on a great rate for equipment financing via a bank you’re talking about a ‘ loan ‘, not a lease – and boy is there a difference.

In Canada a huge equipment lease industry exists, made up of literally tens of players who are small, large, Canadian, U.S., captive to their mfg parent, etc, and on it goes. We’re going to help you demystify who’s who and how you can focus on getting, in your terminology, ‘ a great deal ‘. And a deal that’s approved!

So what are the secrets to getting the best lease rates for your financing? You need to know how the lender thinks, and he or she is thinking about 2 things – they are cash flow and debt burden.

So when you approach a lease company you should have spent time to demonstrate in advance that you can pay for the equipment. This can be done via a historical cash flow analysis, or by the preparation of a go forward cash flow analysis for the next year or so. You are probably doing that anyway for your regular business planning. It has never escaped our amazement that lease companies analyze your old cash flow to see if you can meet their ongoing cash flow requirements a la your ability to make payments, but we’ll leave that for another day.

Want another great tip? It’s simply that Canadian equipment financing focuses on whether the asset you are buying is productive and will assist you to grow sales and profits, so be prepared to articulate that in some manner.

Most Canadian business owners already know the key advantages of leasing: allow you to acquire assets you need that you might normally not be able to afford otherwise, payment and term of lease flexibility, tax benefits, risk of ownership staying with your lessor, and finally great flexibility at the end of a lease to return, purchase, upgrade, or extend.

Getting back to best lease rates themselves we encourage all our clients investigate operating leases, especially when they are acquiring technology – this type of lease will drive your rate down dramatically, because the lessor assumes a hefty residual value based on your desire to return the equipment at the end of the lease – they then remarket the asset. Speak to a Canadian business financing lease expert to determine the true benefits of an operating lease.

Great lease rates also come with faster approvals in Canadian equipment financing – so on a normal transaction you should assume you will have a solid answer back on rate, term, structure, and credit approval in a matter of days. Naturally, as we have stated you should be positioning your case properly, focusing on ability to repay, providing a proper invoice or equipment description, and ensuring your financials are up to date.

Lease funding in Canada comes from, as we mentioned a number of players, some are small, many are large corporations, some are foreign owned, and some only do certain types of deal sizes and assets. Want to demystify that maze – Speak to a trusted credible and experience Canadian business funding advisor who can help you get the equipment funding you need at lease rates your transaction deserves.

Business Finance Strategy to Increase Cash Flow For Small Businesses

Before the market imploded, every other commercial on television was for competitive lending practices with the premise of banks competing to offer the best rate and terms for loans to small and mid-sized companies or individuals. Well, that no longer exists as balance sheet losses pile up and banks keep a tight leash on credit. In response, many small and mid-sized businesses have turned to alternatives strategies to source capital needed to grow their business.

The Receivables Exchange, allows small and mid-sized businesses to sell their accounts receivable to investment entities that compete in real-time to purchase those receivables, giving the business the control rather than the financing institution. By using receivables finance, these companies can quickly increase their cash flow and take control of their working capital.

To get started, selling receivables on the Exchange, a business must complete an online application and provide company information including financials which is then sent for validation and approval. Once approved the Seller pays a one-time fee to join and can list as many invoices as he wants to sell as long as the total value of the invoices in the auction meets the $10,000 minimum.

The Seller then creates the auction, determining how long the auction will last (3-10 days), the minimum advance amount he will accept, and the maximum discount fee he will pay.

A bank loan comes with myriad terms and conditions that can stifle the creativity and ingenuity of a small to mid-sized business and limit their spend flexibility including what the loan can be used for.

By using an online receivables auction marketplace to sell your outstanding invoices, the business can free up valuable cash and take the calculated risks that are all too often a matter of success or failure. The majority of business don’t fail because of lack of a good idea, they go under because they lack sufficient cash flow.

For example, a business owner has an idea for a new product to add to his inventory but it requires a significant amount of cash up-front. The bank thinks it is a poorly designed or impractical product making it too much of a risk.

They won’t lend money if they think for a minute that they won’t recoup their funds. Being able to gain access to that capital fast and at a price points within your control, allows the business the flexibility to take advantage of these opportunities. If it fails, the business isn’t stuck with monthly loan payments.

Pumping cash into a business gives it the fuel needed for growth and the receivables auction process allows the business to better manage its cash flow enabling it to control its own destiny. This process is fairly simple and painless. There are fees, but when compared to the prospect of having to host a “going out of business” sale, these fees seem nominal plus, the Seller has a say in what he pays the Buyer.

Being aggressive about small business cash flow translates into growth and opportunity. To compete and thrive, capital is necessary to add new equipment, build inventory, add employees and expand the business. The Seller has goods or services (invoices) and the Buyer has capital (cash). The online receivables exchange is a meeting ground for the two to come together and make a deal. And because there is a global network of Buyers bidding, the Seller can get a competitive cost of capital.

Personal Finance Strategies for Newlyweds

You had your dream wedding and you have become a couple with dual incomes and mutual responsibilities. Financial strategy is not the most romantic top that you can discuss as a newlywed but it’s definitely a top priority. You both want to enjoy your lives together and plan for that comfortable retirement.

Unfortunately many newlyweds set themselves up for failure. Financial hardship is a leading cause of divorce so to increase the harmony in your lives by talking about financial choices. Plan to merge your financial lives and stop any bad money habits before you bring them in the marriage.

Figure out where you both stand financially. Review all your debt obligations together. Sit down and plan out a way that you together can pay off the debt. It would be ideal to eliminate all debt prior to getting married not to burden your spouse with your debt. If this is not possible then you both must work hard at making your marriage and your family life debt free.

Have a budget. You are now merging two spending and saving habits into one. If you had a budget while you were single, it’s time to draw up a new one as a couple. You should first write down your fixed expenses like mortgage/rent, car payments, insurance premiums etc. Then write down your flexible expenses such as groceries, phone bills and utility. If your budget permits, try to contribute to a savings account as if it was a fixed expense. Track your spending for a while and then work together to identify and fix any common bad spending habits.

Optimizing Insurance. Now that you’re a couple, you need to change your insurance coverage. You should examine the different insurance plans and premiums and decide where the combination should occur. Get an umbrella package which will enable you to save while having all insurance under one package.

Some of the most common sources of arguments in marriage is money, so failing to discuss your financial backgrounds could be disastrous. Communication is key to survival in any relationship. With your budget in place and your plan for your future, you’re both ready for a successful and financially responsible marriage. Your stress levels will be reduced and your foundation will be strong. All this planning will ensure that money does not come between you and your spouse.

Creative Financing For Commercial Real Estate Investors

Commercial Real Estate Investing

There are many income producing commercial real estate properties that are being offered below market that are great investment opportunities. The problem or barrier for most real estate investors buying these properties is the down payment required to acquire them. As a rule general rule to purchase income generating apartment buildings and mixed use multifamily properties one should be prepared to spend 25% to 35% of the purchase price for the down payment. Plus the investor must have closing costs and reserves of 6 months or more. This is a substantial investment that eliminates many potential buyers. This can often be overcome by these creative financing strategies for commercial real estate investors.

Creative Financing

This is a highly misunderstood concept in real estate. My simple definition has two parts. Creative Financing requires a property with substantial equity and a willing and motivated seller. If the seller is motivated yet there is no equity there is no opportunity to utilize creative strategies to acquire the properties. By the same token if the property has enough equity and the seller is neither willing nor motivated no strategy will work.

3 Creative Strategies to Purchase Commercial Real Estate

Seller Financing and / or Carry Back: There are many ways to structure a deal where the seller can finance the property or hold a second mortgage for a short time and then the buyer can refinance the loan. Many lenders requires the loan to be seasoned one or two years. Yet there are lenders that we work with that will refinance immediately requiring no seasoning. These deals close within 3 to 6 months from the initial seller financing contract.
Transaction Funding Programs: These are programs where a private lender will finance the loan from One to forty – five days. The key is to have a buyer ready to close immediately or to be able to refinance at once. This only works when the end lender is aware of the transactional financing and they require no seasoning. As in point #1 above most lenders require one to two years of ownership seasoning so having the proper end lender is important.
Down Payment Assistance Program: If the property has equity and the seller is willing to use it to help the buyer acquire the home, then a down payment assistance program similar to Ameri-Dream or Nehemiah (programs used to purchase residential properties financed by FHA loans) may be a great option for you. Ultimately the Down Payment Assistance Company (DPA) gives the down payment and the seller reimburses the company at closing. This can only happen if there is substantial equity in the building.

As previously stated creative financing requires substantial equity in the commercial income producing property that the seller is willing and motivated to use to strategically sell there property as soon as possible. Lower the price simply is not the answer because the main problem still exist. Commercial Real Estate Investors do not have 25% to 35% for down payment plus closing costs and reserves. Let a professional help you structure your deals to make them close.