Avatar's Blog

Avatar Financial Group lends up to 65% of the current value of commercial property. If you are refinancing commercial real estate property, you will be asked to provide information about the current value of the property when you submit your loan application. If you have a recent written appraisal, the task is easy. But, what do you do if you if do not have that written appraisal available?

Since every hard money lender must send out its own appraiser to determine the current quick-sale value of the property during the due dilgence process, it is best to avoid paying twice for an appraisal. In many cases, comparable properties in your area can be used to determine a reasonable selling value of your own property.

Contact a reputable commercial real estate agent and ask them what they believe you can get for your property if you want to sell it within the next 2-3 months. The realtor will likely be able to provide you with written comps in your area giving you a reasonable idea about the selling prices of properties that have been sold in the recent past and are on the market today. This will provide a reasonable indication of the current resale value of your property.

When submitting a hard money loan package to Avatar Financial Group, an important component of that package is the Executive Summary. This 1-3 paragraph summary concerning your real estate project should contain the following:

• Describe the property clearly. Tell where it is located, what kind of property it is, how large, condition, use, etc.
• Financial info - what did you buy it for - or how much will you pay for the property? If there is a recent written appraisla, what is the current value? If not, what are comps in the area going for?
• If the property is income producing, how much does it gross? What are the expenses? What is the NOI?
• What are you asking for in terms of cash? If you are buying a property, where will the minimum 20% cash equity required ofrm you going to come from? How much will you be putting down? How long will you need the money? What is your exit strategy for the loan?
• And finally, what else does Avatar need to know in order to make a decision about this loan?

 

Substantial increases in commercial property loan requests over the past months will make lenders happy, but make moeny more scarce. With plenty of loans to choose from, the best loans will be those with the least risk and lowest loan-to-value ratios. Packages with complete information, clear color photos, and clearly well thought out executive summaries will get funded. Those with weak loan packages containing information that is dribbled in piecemeal will have a rougher time.

Be prepared. Gather:

• color photos of the property, inside, out and the neighborhood (3 or more of each)
• P&Ls from the property or business that will make the monthly payments
• Personal Financial Statement (get it from the forms page)
• Prepare a well written executive summary. Use bullets and short, clear sentences. Organize your thoughts. Get your point across using facts, not emotions. Lending is a numbers process. Make sure your loan request makes sense for you and the lender before submitting your proposal.

 

 

This time last year, hard money commercial bridge loans could be had for as little as 11% interest plus a few points. This month, with the prime rate hovering at 6%, hard money starts around 13% +/-. With interest rates rising and the increased number of hard money commercial loan requests being observed, it's important to note the changing landscape of business capital funding.

While there are still plenty of investor groups seeking to invest in mortgage backed securities, competition for their money is increasing. Rates will rise, not just from the increase in the prime, but also from the open market supply and demand effects of increased loan requests. Now is a good time to get the privately funded business expansion loan you are considering. Rates will not likely be lower and very likely be higher in the coming year. Likewise, lending criteria may tighten up, as only the best of loan requests will be needed to occupy the investment money available.

Avatar Financial Group has documented ready-to-fund timing of two weeks or less from the borrower's execution of the Letter of Intent / Term Sheet and down payment of due diligence costs. Here's what that means.

When you submit a loan request to Avatar, you are asked to create a 'loan package'. This package contains:

• color photos of the property, inside, outside, and the neighborhood
• P&Ls of the property for last year and YTD for this year
• Personal Financial Statement (get on on the forms page)
• Recent written appraisal or comps (ask a realtor)
• Executive Summary explaining the loan, your situation, and all relative details
  

Once Avatar's president or CEO has reviewed the loan package and determined yours is a loan Avatar is ready to fund based on the information you have presented. A Letter of Intent and Term Sheet is issued to you. If the terms and conditions suit your needs, you 'execute' this letter by signing it, returning it, and making a deposit toward to the costs of due diligence, which will be credited to those costs at closing. From the time you make that down payment, Avatar can generally close in two weeks, assuming you have all the documents required for closing submitted in time. A complete list of these required docs is provided with the Letter of Intent.

In a comforting sign of an improving commercial and industrial climate, demand for commercial and industrial loans has increased over the last three months. The prior months’ dearth in funding requests led some banks to relax lending criteria for some commercial loans. Private lenders have seen a meteoric rise in commercial loan requests. Speed, flexibility well beyond conventional lenders, even with their currently ‘relaxed’ criteria, and a more common sense approach to commercial bridge lending has brought more than 1500 loan requests in the past 30 days alone to Avatar Financial Group.

Avatar Financial Group funds comemrcial bridge loans for exisitng real estate properties. By collateralizing properties you already own, you can generate capital for busineess expansion, purchase of additional properties, or build new projects with the proceeds. While Avatar does not fund land purchases ro construction projects, the use of funds is restricted only to commercial purposes.

In addition, Avatar is able to blanket a loan over several pieces of property. By combining the equity in several properties, sufficeint funds may be generated to complete your financial goals. Contact Avatar for details on options.

Obtaining a hard money loan comes in two stages - the first step is to fill out a two minute loan application on this website. See the home page (above)for the link. At the bottom of the loan app is a space for the executive summary. You will note 5 bullets are listed under the Executive Summary. These are tips for you to use while writing the Executive Summary about your loan request.

This is your chance to be sure you pass the first 'test' or approval process in obtaining your loan. Because Avatar fields more than 200 loan requests each week, requests that arrive with coherent, complete, and logical answers to the five questions in the Executive Summary are far more likely to receive priority attention. Make sure you answer all the questions:

1. Why are you seeking hard money vs. conventional financing?
2. Is the property income-producing? If so, what is the gross & net income?
3. How will you make monthly payments on this loan?
4. What is your exit strategy?
5. Avatar can lend 65%. The borrower must have 20% cash/equity. Where will this money come from?

Avatar Financial Group, like all hard money lenders, don't fund loans that look 'fishy' in the loan package. The best place for a lender to find 'fish' in a loan package is in the Executive Summary and on the Balance Sheet where the price of assets and dates of purchase as well as current value are listed.

Things that look fishy in a loan application package include, unrealistic appraised value estimates, such as, we purchased the property 1-6 months ago and now it is worth 50% - 400% more without having added any capital improvements. Personal financial statements that over-estimate the value of personal property: "It's all someone else's fault" reasons for seeking this hard money loan, rather than a conventional loan. Or, my favorite, "This property was shuttered and makes no money, but as soon as I buy it, it will make millions right out of the gate. But I have no money for marketing or to put down 20% of my own or a silent partner's cash to make this deal happen.

Be realistic. Be fair about your responsibility for the situation you are in today - if speed is why you need the loan, say so. If it's personal credit scores, tell us. If the property doesn't meet banker's lending criteria, tell us and tell us why. With straightforward answers, we can get you an answer on your loan request in a heartbeat without wasting your time.

Whether you are a broker or a borrower, if you are seeking a hard money commercial bridge loan, you'll need to develop a loan package to submit to the lender. At Avatar, we ask for the following items in order to make the initial determination on a loan (issue a Letter of Intent and Term Sheet):

1. Color photos of the property - inside and out
2. Personal Financial Statement (find it on the forms page of this website)
3. last year and this year-to-date P&Ls for the property or business that will support the loan
4. Recent written appraisal if you have one or comps from a commercial realtor is you don't
5. Executive Summary detailing why you want hard money instead of a conventional bank loan, how you will meet the monthly payments, what your exit strategy is for this loan, and any other pertinent info that Avatar will need to know in order to let you know if Avatar can fund the loan.