Commercial Real Estate Loans – Still Closing!

For banks, the Stimulus Package increased the guaranteed portion of the SBA 7a loan from 75% to 90%.  Though many bankers will tell you this doesn’t mean that much, because the government can get out of following through on the guarantee, having some type of backing is a lot better than none at all.

For borrowers the main benefit is having a closed loan.  A lot of borrowers don’t realize the significance of this point.  Others include the widely published reduced fees (for example on the SBA 7a program, the normal fee of 2.75% has been temporally eliminated.  The SBA 504 loan was reduced as well ).  Other major benefits include 90% financing and 25 year amortization schedules.

More info on SBA 7a Loans

Commercial Bank Loans

Conventional commercial loans continues to tighten, whether for owner occupied or investment properties (non multifamily).  What we are seeing actually close, on the conventional side is loans below 60% loan to value, with very strong borrowers.  Most banks now want to see strong secondary sources of income and high levels of post close reserves.  Though there’s no set number/ratio a lot of banks want to see 30% in liquidity, compared to the proposed loan amount…  Some are establishing it as 12 months of mortgage payments in reserves or more. 

Another issue on conventional financing that keeps appearing, for borrowers with investment properties, is lease term.  Banks now want to see a minimum of 5 years left on leases.  Just a few months ago, there was still flexibility with this, now it seems to be gone.