Colli Real Estate

Commercial debt financing may include many types of senior debt

In general, debt financing involves the collection of funds to commercial purposes in exchange for the promised principal and interest payments. There are several types of debt financing available to real estate commercial and other business owners from a variety of lenders, including banks, pension funds, insurance companies, and other financial institutions. Each type of debt has its own function, conditions, risk, cost and maturity. The work of experts in finance Remington is working with both sides of a commercial transaction creatively combine these options with the interests of all parties so to ensure the best possible rates and terms consistent with customer needs and market conditions.

In the capital structure typical commercial real estate, senior debt typically represents 50 to 70% of the capital stack. By definition, the senior debt is just that. It is superior equity and all other forms of mezzanine (junior subordinated) debt. As such, the senior debt is first in line before all other creditors for interest and principal payments and, upon liquidation, repayment of debt. Most of the senior debt on real estate business is amortized over 15 to 40 years, with interest rates fixed or variable. Rates tend to be based on the quality of the security concerned and cash flows propertys history, with higher rates associated with the degree of risk.

Many real estate loans Commercial mature in three to ten years, resulting in a lump sum at the end of the term. Remington professionals are so comfortable, however, to obtain financing through the capital stack for virtually any enterprise application, with or without the participation of real estate, including loans for expansion, working capital, working capital, capital investment, etc.

Overall, asset based business loans have lower interest rate than unsecured loans and can be linked to the element particular asset purchase or other assets of the borrower.

Fixed rate loans: Fixed rate loans offer borrowers interest rates unchanged, with predictable payments for the duration of the loan. Due to strong relationships with public and private sources the capital, many opportunities exist for financing experts to Remington to negotiate with lenders on commercial terms for these loans, especially interest rates and penalties of maturity and redemption. All customers who provide the financing plan Remington the least possible cost and best available.

Floating rate loans: variable rate mortgages are generally linked to The London Interbank Offered Rate (LIBOR) plus a few points on the spread of the base rate. Attractive for borrowers with a requirement from two to four years of funding Floating rate loans are adjusted periodically, have a minimum or no prepayment penalties, and less expensive than ready to Fixed-rate due to the risk of rising interest rates. This type of loan has been particularly popular of late because of the historic low interest rates has in recent years. Remington professionals are highly experienced in securing such funding in the short term or use it as part parcel of a comprehensive long-term funding strategy.

Construction loans: Commercial construction loans are generally Short-term loans to finance the cost of building new warehouses, industrial buildings, shopping centers, apartment complexes or other properties to be sold or rented to third parties or operated by the owners. These loans tend to be amended, as the project construction time and the experience of borrowers. They are to be paid when construction is complete and a certificate of occupancy issued. Borrowers usually require another mortgage to repay the construction loan when it matures. Thus the whole process can lead to two loan applications with their associated costs and shutdowns of a process potentially complex and lengthy that funding for Remington experienced professionals to coordinate, facilitate and accelerate. For more information on loans construction, click here.

Bridge Loans: The bridge loan is a form of financing that bridges the gap between the funds required now and when the long-term financing is available. It can be a key element in a strategy of owners long-term financing, particularly for those facing an opportunity here and now or any other situation, such as improving or selling a property.

Property owners often come to Remington to help secure a bridge loan to buy a second home before selling the first property farm, with proceeds from the sale used to repay the bridge loan. This illustrates the major borrowers must have an exit strategy before an investor makes a bridge loan. In the example above, the investor would need to see a sales agreement stating where, when and how the bridge loan will be repaid.

Bridge financing almost always need to be organized and closed quickly. These loans tend to be 6 to 12 months with a possible extension of 12 months. They are usually structured as a simple interest loan with no prepayment penalty and all the principal due in full at maturity. Investor risk is minimal because the loans are underwritten based on equity in the property and a defined exit strategy.

Because the owners need for speed, banks and other institutional lenders are generally not effective when it comes to bridging loans. That is why the Capital Markets Group at Remington gives investors access to capable decisions on the ground. Among these investors are hedge funds, private equity groups, mortgage pools and other sources private capital. For more information on hard money loans, another type of short-term loan, click here.

Hard lends money: There is another type of short term loan which is similar to the bridge loan in some respects but significantly different in others. It is called hard money loan. hard money loans and bridge loans are just as both types can be quick to close. Both may be needed for a short period of time. And both subject to underwriting limited or less severe. But while the investor bridge loan requires a definitive exit strategy, the source of hard money is not enough. In addition, bridge loans, often have a LTV of 70-95%, while loans hard money does not exceed 50% LTV.

money loans are generally too hard expensive. Unlike bridge loans, which focus on the exit strategy, investors hard-emphasize security, making certain adequate safeguards exist to collect the debt in case of default. Because both types of loans are similar, borrowers often are mistaken that is best for them. More than three-quarters those who say they want a bridge loan benefit as a hard money loan because, for example, the borrower has a credit less than average, a modest financial return, too little experience in commercial real estate, or any defined exit strategy. The finance experts at Remington can quickly resolve any confusion and quickly align the customer with the right type of financing and investment linked.

About the Author

Andy Bogdanoff is the Founder and Chairman of Remington Financial Group. Mr. Bogdanoff is an expert in commercial real estate and commercial debt financing with over 35 years experience.

Authors@Google: Robert Sutton

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