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American Street Capital CRE Overview
The document discusses the fundamentals of commercial lending. It provides an overview of various commercial lending sources such as commercial banks, government agencies, life companies, and private lenders. It then compares these sources across key decision variables such as leverage, interest rates, terms, transaction times, transaction types, and recourse. The document also outlines ideal borrower and property type characteristics and concludes with an overview of the commercial lending process.
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American Street Capital CRE Overview
- 1. AMERICAN STREET CAPITAL TheFundamentals of Commercial Lending 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 2. Presentation Overview  IndustryOverview  Sources  Comparing Programs  Ideal Clients / Properties  The Process  Conclusion 1 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 3. Commercial Lending Sources 1.Commercial Banks 2. Government Agencies  Investment (Fannie Mae & Hud)  Owner-Occupied (SBA & USDA) 3. Life Companies / Financial Institutions 4. Private Lenders / Bridge Financing 2 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 4. The Costs ofSuccess Decision Variables  Leverage  Cost  Timing  Rate  Term  Type  Recourse 3 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 5. Leverage Comparison LTV 50% 60% 70% 80% 90% Private Companies LifeCompanies Commercial Banks FNMA / HUD SBA / USDA 4 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 6. Interest Rate Comparison InterestRate 3 - 4% 5 – 6% 4 - 5% 6 – 10% 10% + FNMA / HUD Life Companies SBA / USDA Commercial Banks Private Companies 5 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 7. Term Comparison Term Length 6– 18 mms 3 – 5 yrs 5 – 10 yrs 10 – 20 yrs 20 – 30 yrs Private Companies Commercial Banks Life Companies SBA / USDA FNMA / HUD 6 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 8. Transaction Time Comparison TransactionTime 21 – 30 days 45 – 60 days 60 – 90 days 90 – 120 days 120 + days Private Companies Commercial Banks FNMA / HUD Life Companies SBA / USDA 7 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 9. Transaction Type Comparison TransactionType Stabilized Property Limited Construction Partial Rehab Construction Full Rehab Construction New Construction FNMA / HUD Life Companies Commercial Banks Private Companies SBA / USDA 8 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 10. Recourse Comparison Recourse Full None Private Companies CommercialBanks SBA / USDA FNMA / HUD Life Companies 9 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 11. Ideal Borrowers Ideal Challenging  680+ Personal Credit Score  640 < Personal Credit Score  1.25x Net Worth / Loan Amount  < 1.00x Net Worth / Loan Amount  12 Months + Liquidity Ratio  < 6 Months + Liquidity Ratio  5 + of Experience  < 2 of Experience  Supplemental income through employment  No Supplemental income 10 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 12. Ideal Property Types Ideal Challenging  ApartmentBuildings with > $750k loan amounts  New Construction Loan  Owner-ocupied buildings with > $750k loan amounts  Loans below $300k  Mixed-use buildings with > $750k loan amounts  Bulk condo purchases  5 + of Experience  Cash outs with less than 6 months of history  Properties with 90% + occupancy  Properties with < 80% occupancy  Properties in established areas  Properties in declining areas 11 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 13. The Process  Applicationsubmitted to ASC staff – 24 hr response  If approved, kick-off call with the borrower – 28 -72 hr approval  Collecting documents and submitting for lender approval – 5 -14 days  Delivering lender letter of intent and proceeding – 7 – 10 days  Underwriting and Third Party Reports – 21 – 30 days  Commitment delivered and conditions to close met – 10 – 15 days  Loan closing 3 – 5 days  Total funding cycle – 50 – 80 days (depending on the transaction) 13 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services
- 14. Conclusion  Matching alender with a proven appetite for your client is critical  Focusing on deals and clients with a high demand among lenders is critical  Working with a proven firm to quickly close deals is critical  Having the opportunity to receive front and back end compensation is critical 16 5/13/2013 Fundamentals of Commercial Lending: Chicago Financial Services