SBA Loan Deals Are Closing: What You Need To Know To Get Your Deal Closed

 A great new blog from our General Counsel, Brian Michaels.  Enjoy…

We talk with a lot of folks in the real estate business and many times the conversation turns to financing. Often it is a question of do you know who is lending these days.

Well, lenders are lending – at least that is what I have heard. The art of the deal though, so to speak, is finding the lender where your acquisition fits in their lending box. That is, lenders have lending parameters and your deal needs to fit within those parameters, i.e., within the lending box (I picked that up from a friend in the business).

One attractive source for commercial real estate funding is through SBA guaranteed loans. I thought I’d write a short post about that as some of you might find the information useful.

In talking with a long time industry veteran with a solid reputation for getting deals done, he tells me that the SBA requires that a minimum of a building must be 51%, or greater, occupied by a borrower within 12 months from the date of closing. The 12 month rule has come into play on several previous deals so it’s worth mentioning.

The equity position is very attractive right now. It can be up to a maximum 90% loan to value for a real estate purchase, refinance, construction, etc. This has a flexible lending box.

They have been busy closing a wide range of deals.  Here are some examples:

• $704,300 Building Refinance: 7A loan for the refinance of two existing commercial buildings. This business is in the construction area and had seen a substantial drop in 2009 and 2010 revenue and net income. 2010 shows improvement, but it wasn’t until 2011 that the numbers show adequate debt-coverage. The lender used projections to get this loan approved and it funded in September.
• $389,100.00 Office-Warehouse Building Purchase: This 7A loan was used to refinance a building for a HVAC company. The owner had several foreclosed properties in the past two years due to strategic “walk away.” His other personal credit was current and his business continued to show good margins. This loan funded in September.
• $1,367,200.00 Self Storage Facility: This 7A refinance was difficult because the subject location was just above a 60% occupancy level, but the loan balance was small enough to still show a 1.15 debt-coverage ratio. This loan was approved and it funded in September.
• $744,100.00 Medical Clinic: This 7A refinance included both a building note and a large amount of working capital to pay-off tax liens. This loan was approved and funded in September.
• $420,000.00 Engineering Company:  This 7A loan was used to purchase an existing building using projections and a business plan. It funded in early October.

They are seeing a lot of action in office/retail, manufacturing, restaurant, self storage facility, wholesale, daycare, grocery store, auto sales, furniture stores, event centers, health clubs, sports centers and construction companies.Where are they seeing activity and getting deals done?

To summarize, the basic conditions are at least 10% equity and at least 51% owner occupied within 12 months of closing.  This pro is just one of the sources we have run across who are actively lending. If you have a deal that fits his lending box or are a lender and have a deal you can’t do and are looking to refer it, and you are interested in discussing it let me know and I’ll put you in touch with him.

I’ve tweeted and posted photos of the building going up outside my office here. That project was stalled for a number of years and just received new financing.

Construction has resumed!

So, I thought I’d expand on that positive aspect of the real estate business: lending getting done and deals getting closed.

I like reporting good news on the real estate front.