Do you remember that song from the 1960’s that went something like: “Where have all the flowers gone, long time passing?” Oh … you don’t? Hmm, maybe I really AM old! Well, I would update that song for the current decade to something like this: “Where have all the lenders gone, no loans funding!”
My walk down memory lane notwithstanding, I am getting a LOT of calls from people telling me that they can’t find commercial financing ANYWHERE. Even our correspondents are making it harder to get projects financed, with a notable exception. Our Construction Project Rescue Financing is going like gangbusters … for the very reason that everyone is calling: No one else is financing!
Our leaders in Washington have not yet realized that you cannot “beat” the market. Or in this case, “beat it into submission.” It is too big to be effectively controlled, as the former Soviet Union discovered. The question remains whether we will be able to afford the education our Congress and President are now getting.
That aside, just WHERE can you get financing for projects right now? Here is what I see in the market and please use these thoughts as a guide as you contemplate placing your financing requests:
Projects that will be considered seriously:
• Borrowers with good liquidity (10% or more of the loan request),
• Good credit (minimum 680 credit score), and
• Good quality properties (quality tenants with reasonable lease rates), that have minimum two years of stabilized operating history.
Lenders and Loan Programs that are active:
• Government Agency guaranteed or sponsored transactions, including: SBA 7(a) and 504, HUD construction loans for multifamily projects, Community Reinvestment Act loans, USDA Business and Industry loans, and to a lesser extent, Fannie Mae and Freddie Mac multifamily loans.
• Life Insurance Companies looking for Class “A” commercial properties that would have gone to a conduit lender. $3MM to $50MM loan amounts, top quality projects, good borrowers and strong tenants describe the kind of projects they like.
• Private Funds taking the place of individual private money. They are buying notes from banks and other troubled institutions.
Other than those areas, it is going to be pretty quiet out there for a while. There is very little trust among financial institutions and borrowers right now and the contracting economy make new projects harder to justify given what can be purchased in distressed situations. However, positioning yourself to take advantage of these niches could lead to, dare I say it, personal riches!