Small balance commercial lending

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Darryl Dahlen Donor

Commercial Loan Officer from Southern Maine

May 23 '11, 01:09 AM

In an effort to get this new forum started, I thought I'd start with a post that should be easy to discuss given some of you residential folks might have a commercial multi-family property or two or be looking for one.

Personally, I consider small balance commercial deals to be those that are under $500k, but every lender is different. I've seen some lenders offer loans up to $750K under their SBC programs, but those amounts seem to be fairly rare, and from what I saw, the rates were horrible (7-9%)

However, as of late, it appears lenders are becoming more aggressive when it comes to SBC lending. As such, I'd like to get your thoughts about what you are seeing with regards to lender activity. I'd also like to get a sense for what kind of term/rates/LTV's are currently being offered.

While I love the lender I use because of their rates, and the fact they don't require an appraisal, I'm always on the hunt for other lenders.

Bryan Hancock

Real Estate Investor from Round Rock, Texas

May 23 '11, 03:49 AM

We financed an apartment complex under $500k in '08 and it was a real PITA to get it done. The rates were on the order you have above absent points.

I haven't seen a whole lot of activity from lenders at this price point lately, but I really haven't been looking much. Aren't these lenders usually small regionals?

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Darryl Dahlen Donor

Commercial Loan Officer from Southern Maine

May 23 '11, 04:14 AM

Small balance commercial lenders tend to cover the spectrum of what's out there. Meaning, small, med, and large banks as well as credit unions.

I don't usually approach the smaller banks as it's too much trouble to find a lender for that small a loan. Not to say there aren't some great ones out there, but where the commercial lending market is still pretty fragile, I prefer to stick with known entities if I can help it.

When it comes to SBC deals, I prefer to work with a larger bank. Their guidelines are the same in Texas as they are in Maine which makes it easy(er) to know what to expect.

Still, if there is a space within commercial lending that has a lot of variety, it's this one. That's why I'm curious as to what other people are experiencing.

David Beard

Real Estate Investor from Cincinnati, Ohio

Jun 28 '11, 01:30 PM

U.S. Bank seems to be the go-to bank in Southern Ohio for these kinds of deals in the 100k to 1M range, including C areas. They offer 75% LTV, 5-year fixed balloons (25-year am), rates in the low 4's w/ no points, and will lend on a project with occupancy as low as 60%, sometimes less, as long as the DSCR is 1.25 or greater (for example, if you buy a vacant distressed property for cash and are looking to turn it around and get financing in place as soon as possible).

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