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"FLASH" of Lightning )
Financial Brokers for Business & Commercial Loans November 2006
In this issue
  • Investment Real Estate - Where should I put my money?
  • Key Commercial Loan Rates
  • SBA Express Loan Program - A Quick solution for your financing needs.
  • Ask the Broker?
  • Greetings Harlan,

    Welcome to "Flash" of Lightning, our monthly newsletter.

    We've written this brief newsletter to keep you, our friend and client abreast of the latest information regarding all areas of financing. We will share with you relevant articles that pertain to financing either commercial projects or business acquisitions.

    Harlan A. Friedman, President & Broker

    Investment Real Estate - Where should I put my money?

    As promised for the next series of newsletters we will be examining each individual investment type of real estate; from what it is, to lenders underwriting requirements to getting your loan approved.

    The key to any piece of commercial real estate as you know from my previous articles is cash flow. If there is no positive cash flow without a significant down payment it is not a "good" investment today. You may elect to hold an investment and hope for appreciation upon a future sale, but that is not going to give you cash today.

    The investment types that will be covered in this series of articles are all known as "cash cows". They typically return an investor a consistent cash flow and therefore a good cash on cash return. The next investment, Mobile Home Parks...

    Why would anyone want to buy Mobile Home Parks? More and more investors are contacting us to help them finance the purchase of a Mobile Home Park, but again I ask you why? The reason is very simple THEY ARE A CASH COW! as so aptly said by our recent investor, Michael C. from San Diego.

    Most parks are owned by an investor who leases out the spaces to the owners of the individual mobile homes. The investor then gets monthly a rent check with none of the traditional headaches that come along with traditional multi family income properties. The rental income for the individually owned units remains in place for as long as the owner or the tenant of the mobile home has his space in the park. Many of the nicer parks also have other income based amenities that increase the projects bottom line.

    Many of the lenders that specialize in the area of mobile home park loans will not lend on park owned coaches. In actuality they will deduct the fair market value of any park owned coach from the purchase prices.

    Maximum. Loan To Value - 80 %
    Maximum. Amortization – 25 to 30 years
    Minimum DSCR - 1.20x to 1.25x
    Minimum Vacancy Reserve – the greater of actual or market vacancy; typically 5% to 10%
    Minimum Replacement Reserves - the greater of actual or $35 to $75 per pad
    Minimum Occupancy requirement – typically 85%
    Cap Rate – use market-driven capitalization rate; typically 9% to 11%

    Park may include single and double-wide skirted coaches in good condition with concrete patios or raised porches, paved streets. Parks that derive more than 25% of Annual Gross Income from rent attributed to “park owned” units may be limited to a fully amortized mobile home park loan whose term will not exceed the average remaining economic life of the park-owned units.

    Key Commercial Loan Rates

    Key Commercial Loan Indexes

    Fed Prime Rate 8.250%

    10-Year CMT 4.520%

    30-Year CMT 4.610%

    USD 6 MOS LIBOR 5.347%

    As of November 30, 2006

    SBA Express Loan Program - A Quick solution for your financing needs.

    Need money quickly, SBA Express may be the answer for a business owner.

    SBA Express Maximum Loan = Amount: $350,000
    Interest Rate:

    Lenders and borrowers can negotiate the interest rate. Rates are tied to the prime rate (as published in the Wall Street Journal) and may be fixed or variable, but they may not exceed SBA maximums:

    Eligibility Decision:

    By SBA, Qualified Lenders May be granted Authorization to make eligibility determinations, without having to seek additional approval from the local branch office of the SBA.

    Revolving Lines of Credit:

    SBA Express allows revolving loans up to 7 years with maturity extensions permitted at the outset
    Turnaround Time: Within 36 Hours


    Lenders are not required to take collateral for loans up to $25,000. Lenders may use their existing collateral policy for loans over $25,000 up to $150,000. For Loans greater than $150,000, follows SBA's general collateral policy

    The best candidate for these loans are an existing business that is in need for additional capital for a specific purpose. These loans are not usually approved for business start-ups. Many of the lenders will be more interested in these loans if they came along with a new banking relationships. So think about moving your banking to the lender that offers you an SBA Express Loan, its a great motivator for the bank.

    Ask the Broker?

    We're interested in acquiring a construction loan and we own our property free & clear, its valued about $1.5 million. Can we build a small development project for about three million for no money out of our pocket, other than pledging the equity in our land?

    Generally the answer is yes. But let me explain. When building a project we look to loan at loan to cost as a guideline rather than loan to value. Most lenders will lend between 80 to 90% loan to cost, cost being the project cost to develop.

    As you mentioned you have a property that is worth 1.5 million so in essence you now have 1.5 million in equity towards your ultimate development. Also equity can be any other costs directly associated with planning your development, and any "soft" costs that you have acquired as well.

    You may now have the ability to build a project of up to $5,000,0000 or even higher, depending on other factors, such as appraisal of the property. But if you are planning a small development and have the right team in place you should not have to come up with any additional equity.

    Please email your questions to "Ask Your Financial Broker" at

    UP-Coming Seminars
    Call the Office at 858-592-0659 for upcoming topics, times and dates.

    Call the Office at 858-592-0659 for upcoming topics, times and dates.

    Quick Links...

    phone: 858-592-0659

    Lightning Commercial Funding, Inc. | 16486 Bernardo Center Drive | Suite 100 | San Diego | CA | 92128