New business creates liquidity Equity Loan

Commercial building owners have struggled for decades on how to make effective and economic equity trading their properties. This lack of liquidity seems to be one of the biggest complaints in commercial real estate, equity rich, cash poor, as the saying goes.

There are some new options, however, for small commercial property owners (both investors and users) that are turning heads. Historically, access to commercial capital through loan products was very limited, and for good reason. Privileged position in second behind a separate financial institution is one of the most risky for a commercial lender to be in.

However, in the past, small local banks have been known to address these types of loans assuming that the combined loan to value and debt coverage ratio were strong - typically less than 60% LTV and more than 1.4 on a DCR. Banks has written these lines almost like a business loan that happen to be secured by commercial construction. The bank also wanted a "relationship", the depository as bankers always say, with the borrower.

Developer of large sophisticated projects have also had 2 nd lien position loan options, called mezzanine loans. But these types of loans are normally available only to developers with extensive experience and success working on projects over $ 5,000,000.

It is interesting to note that some lenders have recently stepped up a few lines of actions and created aliases commercial lines of credit business. The result has never before known liquidity for owners of small buildings. Highlights include no upfront fees to close the loan (not rated, no license, and without environmental costs), combined loan to values ​​up to 75% and interest rates relatively low in the first, plus 0.75% - 1.25%.

We'll see over time how much of an impact those lines of business make the capital "Main Street" USA but one thing is certain: the owners of commercial real estate loan options have more now than ever before....