Is debt financing beneficial while using securitization financing?
Is debt financing beneficial while using securitization financing?
Small business loan program is popular among the people who own a business. But the opinion about this program varies as different people hold different opinion. Therefore, in this article we’ll review about the other non conventional debt financing transaction used by the other business organization that can be beneficial for the small businesses. Securitization financing is an innovative financing program that can help companies to raise capitals.
Before discussing further on this program you should be aware of the problems that a small business faces while seeking debt financing.
When a small business seeks for start up or expansion capital it does not have a credit history. Secondly, it does not have sufficient collateral and last problem that it faces is the ability to make payment on the owed amount. Therefore, if you are aware how you can pay off your debt then it will not be difficult to manage the first two problems. In case you get a loan but you are not required to pay it off before two or three years then it is known as Securitization financing.
Know about Securitization Financing:
Securitization financing means that providing soft security for instance a bank guarantee, tax credits, equipment financing as security against a loan provided back to the borrower. The lenders are required a business summary plan description. You are also required to provide the name of the bank issuing the instrument for verification. Once you get approval for the loan then you can obtain the fund within two weeks. Remember if your issuing instrument has authority as well as quality then it is the key factor for getting the loan. This type of loan program will be offered by the venture capital as well as investment banking firms.
Remember that the debt financing is similar to equity investment. In this type of program the borrowers have major advantages. The borrowers are not required to repay the fund until 4-7 years after they get the loan.
Know about the salient feature of the debt funding:
1. The borrowers can rearrange the payment in
accordance with your income.
2. Between 2 years and 25 years the borrowers can easily structure repayment of funding3
3. Remember that the corporate security deposits are not attached for debt transactions as the fundings are private placements and are off-balance sheet.
Pablo Garcia is an Associate Editor with Oak View Law Group. He has been writing on financial topics over the years with special focus on American and European economy. Pablo also takes interest in debt related issues and contributes articles on debt consolidation services to personal finance blogs.
Part 2 of questions you should ask about a hard money commercial loan
The following is part 2 in our series of questions you should ask your lender when evaluating a commercial loan with hard money, or private funding.
If a bank has rejected your commercial loan, you may be looking alternative financing. A hard money loan can be a real option if your project will be profitable.
6. Does each deal get funded by an individual private lender or do you have a pool of money to draw from to fund deals?
7. Do you require a personal guarantee?
8. What is your interest rate?
9. Is it interest only?
10. What is the term of the loan?
If you are looking for a commercial loan in Colorado, Florida, Georgia, Kansas, Kentucky, Maryland, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia and West Virginia give us a call.
Questions you should ask about hard money commercial loans.
The following is part 1 in our series of questions you should ask your lender when considering a commercial loan with hard money, or private funding.
If a bank has turned down or rejected your commercial loan, you may be considering alternative financing. A hard money loan can be a very viable option if your project will be profitable.
5 Questions you should ask your potential commercial lender about a privately funded loan.
1. Where do you lend?
2. What kind of properties will you lend on?
3. What are your credit requirements?
4. What is your turn around time to lend?
5. Will you lend to a LLC?
Please check back for more of these in the coming weeks!
The Exit Plan for your Hard Money Commercial Loan
Another segment in our continuing series on hard money commercial loan questions. If a bank has rejected or turned down your commercial bank loan you may be looking for an alternative funding source to meet your projects needs.
These FAQs may help you decide if Hard Money financing is something you should pursue.
Question 12. What is an exit strategy?
Your exit strategy is your Business Plan for repaying the loan. You must have an acceptable Exit Strategy if you expect to be approved for funding.
Can I get a Hard Money Commercial Loan for repairs?
This is part of our continuing series on questions about hard money commercial loans.
If you have had a commercial bank loan rejected or refused you may be looking for an alternative funding source to meet your projects needs. These FAQs may help you decide if Hard Money financing is something you should pursue.
11. Can I get money to pay repairs?
Yes. Most Lenders require a “Draw Request” form to be filled out to identify the completed repairs to the property, copies of the invoices from the contractors or sub contractors. After work is inspected, draws can be dispersed. Typically work is not paid in advance.
Loan to Value on Commercial Hard Money Loans
If a bank has refused to fund your commercial loan you may be asking what alternative financing options are available. If you have a profitable project, a hard money commercial loan may be a viable option for you.
This is another in our series of FAQs about Hard Money loans.
10. What do I have to put up for collateral?
You will put up the subject property. If the loan to value (LTV) is high, it is an unusual property, or the lender feels the risk is high, you may be required to put up another form of collateral and/or a personal guarantee. You will need to have an LTV of no more than 65% and many lenders are looking in the range of 50%-55% or better.
Call us today and let’s get started on having your project evaluated.
Due Diligence Fees in Hard Money Commercial Loans
If you are looking for an alternative loan because your commercial bank loan has been rejected or turned down you may have questions about hard money commercial funding.
This is another in our series looking at frequently asked questions regarding this type of loan.
9. What does up front due diligence have to do with back end due diligence/origination fees?
Up front your broker oversees your package making sure all paperwork is up to par for submital requesting an LOI. Back End due diligence fees are for compiling numerous pieces of information required by the lender once the Letter of Interest is signed.
What are Due Diligence fees?
These are fees for assembling and sending paperwork, documents and information that the lender requires to receive a letter of interest.
If you have additional questions please call us. We are here to help!!
2 More Questions About Hard Money and Commercial Loans
Considering a hard money loan after your commercial bank loan has been rejected? Here are a couple of more questions that are frequently asked.
7. What are the costs?
All loans will require Title Policy, Insurance, and Appraisal. These services range in price from a few hundred to several thousand dollars. Most require origination points from 2%-10%.
8. What do Due Diligence fees consist of?
These are fees for compiling and submitting the information and paperwork necessary to convince a lender to commit to a letter of interest. Once a Letter of Interest is acquired and a commitment is signed Back End Due Diligence would cover the information gathering and submitting of paperwork required of the clients to bring the loan to closing.
Give us a call today at (864) 297-6551 to discuss your project.
Just because you have been turned down for a commercial loan doesn’t mean you can’t get funding for your project. Let us help you research commercial loan alternatives.
3 FAQs about Hard Money to consider when your commercial bank loan has been rejected.
If you have been turned down for a commercial loan by a bank, here are 3 more questions you may be asking about a hard money commercial loan:
4. Does my credit matter? Do you base your loans on credit scores or on the value of the property itself?
Maybe. Hard Money Lenders do check credit, not necessarily for credit scores. They are looking for bankruptcies, foreclosures, charge offs and collections. They are looking for your ability to repay. The loan is more collateral based, so look closely at the value of the property.
5. Do I need to put money down?
Generally, yes. Most Lenders want to make sure you have enough resources to finish repairs and cover the costs of the loan plus surprises. Expect to pay all origination/discount points and other costs at or before closing. If you cannot afford to close you typically cannot afford to take out this type of loan.
6. What are the terms?
Terms will be based on the availability of funds at that time, the quality of the product you are using as collateral, your ability to repay the loan, the length of the loan, and the amount of collateral as a percent of the loan LTV (Loan To Value)
If you have more questions please give us a call at (864) 297-6551.
Don’t let the fact that a bank turned down your commercial loan stop you. Let us help you research alternative commercial loan possibilities.
Three Questions you should ask about your commercial loan.
When you have a bank loan rejected, and you are looking for alternatives you may need to explore a hard money commercial loan. When considering a hard money commercial loan there are questions you should ask.
Here a a couple to start with:
1. How much will it cost Arcon Commercial Lending to find a loan?
Fees vary based on the type of loan and how much up front work is required on Arcon’s part. There will be points and fees from the lender as well as from Arcon. The fees in total can be as high as 10 percent and as low as 2 percent.
2. How long will it take Arcon Commercial Lending to find us a loan?
Times vary from a few days to several months. Generally the appraisal takes the majority of the time. The second factor is the time it takes for the client to submit the information we need to complete the loan process. Normally 6 weeks is a good rule of thumb if everything goes as planned.
3. Can I use an existing appraisal?
You are going to need a current one, within 3 months, and the lender will most likely order their own just before closing.
If you have any questions, or we can help you please do not hesitate to call.