Liquidity Requirements for Commercial Loan

[Gordon Way]

I have a 58-unit building under contract @ $2.5M. The bank I was planning on working with was offering 5yr fixed @ 5.0%, 25yr am and 75% LTV. First two years are interest only as we move off of a HUD contract and into the local housing authority voucher program (the tenant base is low-income seniors). Everything was looking good, it's a recourse loan. Then they said I need to have 30% of the loan amount (nearly $600K) in liquidity that is not part of the deal from the guarantor(s). This is an LP, I'm the sole GP and the funds must be in my or someone who guarantees the loan accounts. Originally they said it could be in a retirement account if the person is at or above retirement age. I got my parents onboard and they filled out the financial statement and we sent it in. Their retirement is about $1M, so we thought this obstacle was gone. Now we come to find out that retirement accounts, no matter the person's age, can't be counted towards this liquidity requirement.

My question is to you all, have you run into this type of underwriting? The bank is rather conservative but we have worked with them before. I would have expected a liquidity requirement based on a couple (3-6) month's PI payments that could have been held in the LP funds. Any advice or stories for your experience in this predicament is much appreciate!

[Greg Dickerson]

@Gordon Way you need to shop some more banks and commercial brokers for options. Some banks will allow retirement accounts some will not.