All Forum Posts by: Dan Wallace

A lot of misinformation floating around out there. Such as you can only apply with your bank that you have a deposit relationship with, not true. I am to understand the 1099'd and sole proprietors are eligible and the requirements for these businesses are still being determined. If you are a contractor/1099'd you will need to file your own claim.

@Ben Steelman I'm not sure whether HOA fees will be eligibe

As a part of the $2 Trillion CARES Act, the SBA is authorized to lend $349B to small businesses impacted by the COVID-19 economic impact.

The primary program for small businesses through the CARES Act will be the Payroll Protection Program (PPP). The PPP encourages small business owners to maintain historical employment levels by providing funding for payroll and other specific operational expenses. The application process is getting finalized but it will be streamlined to get funds into small business owner's hands and maintain employment.

One of the primary features will be that if employers maintain or re-establish employment levels to historical levels, that portion of the loan proceeds will be forgiven. That's right, there will be no repayment on those proceeds. Additional proceeds may also be forgiven that went towards utilities, mortgage interest/rent, and few other types of operating expenses.

These proceeds are expected to move very quickly and there are lenders getting systems in place to streamline the application and submission process. As with any government program there are some nuances and timing issues. 

@John Watson many more factors to take into account than residential or MF.

One source you may want to utilize is any commercial appraisers in your area. I find the commercial appraisers have a ton of market insight and should be willing to help give you insights since they may need some market insights and/or business from you at some point. Industrial properties may sit vacant for a period of time so landlords may be more willing to give lease concessions.

@Kevin Boyd if you are looking to refinance already, I assume you secured an SBA 7a and the terms are not great. Making that assumption, you appear to be in year 2 so that means you have a 3% prepayment penalty. You would want to wait until at least you dropped down to year 3 where you have a 1% penalty.

You had a good down payment when you bought the subject property and I assume your LTV is even better. To be SBA eligible you must have been at least 51% owner occupied. I think you could get good conventional commercial financing terms, especially if you are in a major metro area. There are some really good conventional programs out there for this type and size of project.

@Joseph Stewart congrats on your pending sale.

Sounds like you have some insights with hotels based upon the questions you asked. I have worked on several hotel projects from both the perspective of buyers getting financing and also post-recession when I worked for the FDIC cleaning up failed bank portfolios. I have a unique perspective from both the good and the bad. One of the failed banks I dealt with had a fairly large hotel loan portfolio.

I will share with you that during an economic downtown, one of the first sectors to get hit is hospitality or any other discretionary expense industry. Many hotels rely upon business travelers and during a downturn, the first thing to be cut by businesses is travel. Also, leisure travelers pull back as well. It has been my recent experience that many commercial lenders are pulling back hard on hospitality lending in general. There are a few large lenders pulling back almost entirely since they see the economic storm clouds forming.

Recently, I have financed a few hotels including a ground-up construction and in all of my deals, the partnership group had strong direct industry experience. There are still a number of lenders who are aggressively lending in this space but be cautious since I do think hotels are overpriced in general.

This is just my perspective and hope it helps.

Coupling a hard money loan and commercial loan on the same deal seems contradictory. A true commercial loan has to be underwritten to certain industry standards while a hard money loan is primarily LTV focused. Any reputable commercial lender wants to understand the cash flow and repayment ability of the project/borrower. A hard money loan in my experience is very short term with high rates/fees. A commercial lender would (or should) be sensitive to hard money terms since the hard money loan would have a short maturity and if the borrower was not able to pay the hard money loan off, put the project in jeopardy of default.

Kind of some broad strokes but generally a full doc loan (commercial/conventional) would not seem to go well with a hard money loan.

Commercial Mortgages

Great Terms

Fast, Reliable Service

Office, Retail, Industrial, Mixed-Use

Program Features:

• LTV's as high as 90%
• Rates as low as 3.75%
• 25 yr fixed interest rates available
• Loans from $500K to $10MM
• Owner-Occupied
• Cash-out Refinance Available
• Amortizations up to 25 yrs

I think your best bet would be to use an SBA or depending on location, a USDA loan. There are primarily two types of SBA loans, one that primary (but not always) has a floating rate (SBA 7a) and one that couples a conventional first mortgage with a second lien SBA loan (SBA 504). Don't confuse the two programs. The SBA 504 loan can lend up to 85% LTV on this type of project possibly and the rate for the SBA 504 is currently at 3.5% fixed for 25 years. If you can find a good conventional lender, you can get very good combined financing terms.

I just quoted an SBA 504 loan with a conventional first mortgage fixed for 25 years at 5.23% with an SBA 504 loan at 3.5% fixed for 25 years. Unfortunately, a storage facility would not qualify for these conventional terms but you get the idea.

Based upon what I think you are asking I believe @Christopher Phillips is correct. Any conveyance would be considered a sale and the note could/would be called similarly to any sale to a third party. A transfer of ownership regardless of whether it is arms-length or not would cause the note to be called due.

As for transferring any property to some other entity and then not recording officially, my understanding would be that would not be a proper transfer and any liability would be on the party who was the owner of record at the time of an incident or claim. I am not an attorney but I would think this may be construed as a fraudulent conveyance and any moderately competent attorney would pierce this type of transfer.

Institutional money (Top Tier market, experienced sponsor):

Down payment: 20%

Term: Up to 30 yrs

Rate: Fixed 5 yrs 4.3875%/4.5%

Bank money (less stringent underwriting):

Down payment: 25%

Term: Up to 25 yrs

Rate: 5.125% to 5.375%