Quickest and most profitable way to raise equity when trying to satisfy the banks request of 100% financing
Originally posted by @Andres Felipe Aristizabal :
100% financing in my world means you either have ALL bank or NO bank.
Commercial Real Estate Investment:
Say a business owner has secured 80% of a construction loan through the bank but is needing additional 20% to complete the loan for the commercial property to break ground. Would this interest an investor. Is it worth the energy so to speak
the bank has agreed to the construction loan (80%) which will rollover to a conventional loan once an investor is willing to invest the 20% I would think...
This is the typical Syndication model. If you don't have your own funds to cover the balance between the construction loan and the funds needed to complete construction, you will likely need to raise those funds from investors under an appropriate securities exemption. You would raise money from investors by selling ownership interests in your company. This could be from a single investor or from a group of investors who make contributions to your company in exchange for a share of the ownership in the project. In exchange investors will be entitled to a share of the profits and/or a fixed ("preferred") return on their investment.
Most lenders won't allow you to "borrow" the money from investors as most commercial loans prohibit subordinate debt. The lender may want to underwrite any investor who acquires more than a certain percentage of your company. For commercial loans, this may be as low as 10%. Before closing on the construction loan, the lender will want to see how much money you have raised, who the investors are, and their percentage interests in your company. so they can make this determination. I would be happy to talk to you privately if you have additional questions.
I agree with Kim. The best way to succeed in syndication is to have a Tribe of followers who are ready to invest in your syndications. This takes time and effort. If not, you may be able to get funding from friends and family who know and trust you. You can form an LLC with them.
Best of Luck!