New programs

While much of my practice surrounds commercial mortgages, there's a whole world of programs out there, especially for business owners with less than perfect credit.

Non-traditional business loans we can write include:

• Heavy equipment leasing and purchase: These loans include items for heavy trucks and other construction equipment, especially bulldozers and excavators.
• Accounts receivable financing: an excellent method for businesses to get through predictable dry seasons in revenue.
• Medical working capital: Doctors, dentists, veternarians, and other medical professionals can get immediate loans to expand their practices, consolidate debt or even handle personal expenses.

Those last loans tie together very nicely with a loan program for medical professionals that allow for a purchase of office space wtih 97% loan-to-value.

Are REITs undervalued?

REITs have taken some big hits during the credit crunch, and now some analysts are wondering if there should be an upward correction.

Does this create an investment opportunity for entrepreneurs? Maybe, maybe not. I'm a firm believer in only investing in things I understand completely, (which rules me out from most investing.)

What does seem to be the case is that the underlying fundamentals for commercial loans and commercial real estate are still sound. If anything, the credit crunch has made made lenders become more prudent:

However, because lenders are more cautious, some deals may get postponed or be slower to complete than in the past few years, she said. “We’re seeing a return to the fundamentals and deal structuring of the mid-(19)90’s and may see some dampening in investment activity, but there is a lot of momentum in commercial real estate.”

The lights are back on....

With the recent turmoil in my family, the blog went on extended hiatus. (Anyone who's caught the blogging bug knows that two weeks can seem like an eternity.)

But we're back on the air, brought to you by my new partners, Fortress Financial.

The folks at Fortress have a great approach to business, with a genuine caring and commitment to helping people build their financial futures. I really haven't run across a mortgage company so committed to helping people plan five and ten years down the road.

In memoriam: Ward Meston

Last night my father-in-law, Ward Meston, of Albuquerque, NM, passed away. In a way, he was another combat death of the Vietnam war: his death was due to Parkinson's Disease, which he contracted as a result of exposure to Agent Orange.

What strikes me most about his life was the intensity of his courage. I never saw him brag or try to intimidate anyone, but just a few of his Vietnam stories, told in a dry, matter-of-fact tone, would stay in your mind for ages. While Ward certainly didn't suffer in silence, no one could have ever called him a moaner or a complainer, or one who gave into self-pity. One time he took me out fishing. We were walking down a gravel path, with Ward pushing his walker and shuffling along, until we came to a spot about 8 feet over the creek we were taking on.

This was a slope that looked nearly vertical. I was hesitant to go down, and that was before I blew my ankles out. Ward folded up his walker, laid it down, and scrambled down the steep embankment.

He was the kind of American that we just don't see enough of these days: tough, self-reliant, and a man who made no apologies for how he lived and never asked for one. He fished waters from farm ponds to mountain streams to the deep seas, and he kept going hunting until he could no longer hold a gun. John Wayne, Gary Cooper, and Ernest Hemingway would have been proud to be in his company. He was a role model for me, he was proud of his grandchildren, and I know anyone who knew him will miss him.

What you need to know besides rate

I had a strange conversation with a commercial real estate broker the other day. Essentially he wanted to know information from me, but wasn't giving the information I needed to give him what he wanted.

One of the worst questions you can ask a broker is "What's your rate?" That very question contains a message you're probably not intending to send: in essence, you're saying to the broker that you're going to judge a loan based on one aspect that can be highly misleading.

Here are some other questions you can ask that will get you much better information, and put you in the driver's seat.

1) Is there a lock-out? A lock-out is essentially a prepayment penalty on steroids -- it keeps you from refinancing the loan for the duration of the lock-out. So, for instance, if someone puts you in a loan that adjusts every year and has a three year lock-out, you could be in bad shape.

2) Is there a pre-payment penalty and how long is it? I've seen loans with no pre-pay penalties (and they have higher rates.) I've also seen loans with fifteen year pre-payment penalties.

3) Is the loan full recourse or partial recourse? A full recourse loan sure has a lower rate, but it has a lot of consequences.

4) How is the lender treating the property? Most lenders have four tiers, and generally speaking, you'll find the same properties in these tiers. But there are exceptions -- some lenders, for example, have car repair facilities in the same tier as gas stations. Others won't touch gas stations. Some lenders care that a property is vacant, others don't.

5) What's the loan-to-value ratio? A 97% LTV ratio is a more expensive loan than an 80% LTV, but it's worth it to some people to not have to sink a bunch of cash into the property.

How to make your loan a slam-dunk

I recently got some feedback from a friend of mine on this post. He was urging me to be more positive.

Okay -- I am positive that I want your loan to close.

Well, that's probably not the kind of positivity he was talking about. So from the other end, here's what you can do to make sure your loan goes through.

1) Always be completely upfront. If there's anything about your deal that might be a little off, disclose it immediately. If, for instance, you own a building under one LLC, and you own another LLC that's paying a lease to the first LLC, that may or may not be an issue. Disclose it at the start of the process.

2) Be ready with the data. Any commercial lender I work with is going to want the same kinds of things: rent rolls, P&L statements, tax returns, Phase 1 reports, etc. You don't have to wait until you have every single piece of paper ready, but be prepared to get it. If you don't have the data easily available, that's going to be an issue -- one you should disclose early to your loan officer.

3) Explore a variety of options. Compare a lease versus ownership. Compare a refinance to a non-collateralized loan. Think hard before taking a loan with a lock-out or a pre-pay. Sometimes those are good loans, other times they aren't. This is your business, and its whole future could ride on making the right choice here.

4) Crouching Tiger, Hidden Dragon. If you didn't see that movie, the title was a reference to a continuing theme in Chinese martial arts... waiting for the opening and then moving without hesitation once it shows itself. As I wrote before, the number one deal killer I've seen is a reluctance to move on a deal when it's on the table.