Hedge Funds Providing Real Estate Bridge Loans

With fewer banks making commercial real estate loans due to the credit crunch, hedge funds are becoming increasingly willing to fill the gap by providing commercial real estate bridge loans.

In today's The Wall Street Journal (subscription required), it is reported that as many as 140 hedge funds are actively pursuing providing "hard money" loans at rates ranging from 10% to 20%.

Not only borrowers with bad credit or tough deals are using these bridge loans which typically mature in under two years. Borrowers with good credit are using bridge loans to close deals much faster than commercial banks can fund.

I am also seeing more requests these days for commercial real estate bridge loans. Lately, I've seen requests for private money loans to fund the acquisition of gas stations, to refinance an automobile dealership, to refinance a single purpose property and to re-finance a construction loan for an office building.

As I have previously mentioned, I'm working with one private money, bridge lender whose rates currently range from 8.5% to 10.0% (before points) for bridge loans secured by commercial real estate in California of all property types. The lender is able to fund loans of up to $50 million and is willing to consider properties in other western states.

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Tags : commercial real estate , hard money loans , bridge loans , private money loans , hedge funds , California

Next Shoe to Drop - Commercial Real Estate Loans

Ten months ago, I noted that some feared commercial real estate loans could be the next shoe to drop.

Today's New York Times cited evidence suggesting that time may be here.

Delinquencies and default rates are increasing, the availability for new commercial real estate loans is drying up and prices for commercial properties are softening. Moody’s/REAL Commercial Property Price Index has dropped nearly 12 percent since its peak last October.

I spent a lot of time this past week talking with bankers and commercial real estate lenders. I heard about cease and desist orders on construction lending, inability to lend against commercial real estate, tenants no longer qualifying as "credit-tenants", reduced loan to value advance rates, tighter underwriting criterion and a need for more bridge loans.

The other shoe is dropping.

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Tags : commercial real estate loans , private money loans , bridge loans , hard money loans , credit tenant leases , California

Fixed Rate Equipment Financing

Fixed rate or floating rate equipment financing? That's the question posed to me by the business strategy advisor to a transportation company.

The trucking equipment being acquired is brand new and according to the borrower, has a useful life of 6 to 7 years. The equipment financing options include a 6 year, fixed rate loan from a major commercial finance company or a 7 or 10 year, floating rate loan from a commercial bank through the SBA 7a loan program. The initial interest rate on the SBA loan options is marginally lower than that of the fixed rate equipment financing.

As the financing options are not mutually exclusive, I've recommended that the borrower accept both the fixed rate and floating rate financing offers.

In my opinion, interest rates are more likely to increase than to decrease over the next 5 years. The company can minimize a portion of its future interest rate risk by locking in the rate on a portion of its financing requirements today.

What course of action would you recommend?

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Tags : Equipment leasing , leasing , equipment finance , SBA loan , SBA 7a , fixed rate financing

Credit Tightening Results in New Asset Lenders

According to the July 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices, at least 60 percent of domestic banks reported having tightened lending standards on commercial and industrial (C&I) loans to small businesses and large and middle-market firms over the past three months.

About 80 percent of domestic banks reported having tightened their lending standards on commercial real estate loans over the past three months.

Both of these statistics point out why new lenders are jumping into the lending markets for both asset based business loans and real estate bridge loans.

On Monday I met with a new lender offering asset-based loans ranging in amounts from $500 thousand up to $10 million, an under-served niche within the asset-based lending market.

This lender is a new joint venture backed by a very large, east coast based fund. They will primarily lend against collateral consisting of any combination of machinery & equipment, rolling stock, inventory, accounts receivable, real estate, and intellectual property. Typical clients include small business owners, turnarounds, start-ups, businesses needing bridge loans, and companies needing bankruptcy exit financing.

The main target for these asset based loans will be small businesses with no financing alternatives due to the liquidity crunch and tightening credit requirements in regional banks.

Targeting businesses throughout the United States, this asset based lender looks strictly at asset value and does not require the borrower to have audited financial statements.

Expect pricing to reflect the risk profile of the borrower and the quality of the assets. In other words, don't expect bank rates!

If this lender sounds like a good fit for your financing needs, read "Matchmaking for Business Loans" and give me a call!

Tags : Federal Reserve , business loans , credit crunch , asset based loans , accounts receivable , equipment , inventory , collateral loans

Top 5 Bank Leasing Companies

A major industry leasing publication just published its list of top 50 bank affiliated leasing companies in the U.S. ranked by net assets based upon 2007 activity.

Holding onto its number one ranking from 2006 was Bank of America Leasing. Interestingly, the order of the top 5 did not change from 2006.

1. Bank of America Leasing
2. Wachovia Equipment Finance
3. Citicapital
4. Key Equipment Finance
5. Wells Fargo Equipment Finance

Of the top 5, Wachovia and Citicapital both booked less business than the prior year. Wells Fargo had the biggest increase in net assets growing over 50% in one year.

I expect the rankings to look different next year as Citicapital has sold off significant leasing assets to both CIT and GE Capital.

One other interesting note, more than 40% of the top 50 banks reported increases in delinquencies, credit loss provisions and net charge-offs. Just like other types of lending, the leasing arms are probably "cherry picking" deals and increasing rates in 2008.

Need help finding the right leasing company or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Tags : equipment leasing , leasing , Bank of America Leasing , Wachovia Equipment Finance , Citicapital , Key Equipment Finance , Wells Fargo Equipment Finance

Single Tenant, Net Leased Market Changes

According to the July edition of Real Estate Forum, the balance sheet problems of commercial banks and the collapse of the CMBS markets are resulting in market terms for debt financing for single tenant, net leased properties reverting to conditions last seen before the in the 1999-2001 era.

Here's what that means according to the article by Michelle Napoli.

• local and regional banks are now the "go-to" source of mortgage financing
• full or partial recourse is back on the table
• leverage is lower and interest rates are higher
• loan term durations don't exceed the length of the lease

The lenders with whom I speak cite similar changes to the debt financing markets for all commercial real estate property types.

One bridge lender interviewed in the article claims to be seeing a lot more deal flow as borrowers "cannot get financing through avenues they typically use".

A private money, bridge lender that I show deals to has experienced the same increase in deal activity. This lender's rates currently range from 8.5% to 10.0% (before points) for bridge loans secured by commercial real estate in California of all property types. The lender is willing to consider properties in other western states.

Need help with an introduction to a bridge lender for commercial real estate properties? Read "Matchmaking for Business Loans" and give me a call!

Tags : commercial real estate , private money loans , bridge loans , hard money loans , Real Estate Forum , credit tenant leases