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.

1. AMERICAN STREET CAPITAL
The Fundamentals
of
Commercial Lending
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Fundamentals of Commercial Lending: Chicago Financial Services

2. Presentation Overview
 Industry Overview
 Sources
 Comparing Programs
 Ideal Clients / Properties
 The Process
 Conclusion
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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
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4. The Costs of Success
Decision Variables
 Leverage
 Cost
 Timing
 Rate
 Term
 Type
 Recourse
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Fundamentals of Commercial Lending: Chicago Financial Services

5. Leverage Comparison
LTV
50%
60%
70%
80%
90%
Private Companies
Life Companies
Commercial Banks
FNMA / HUD
SBA / USDA
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Fundamentals of Commercial Lending: Chicago Financial Services

6. Interest Rate Comparison
Interest Rate
3 - 4%
5 – 6%
4 - 5%
6 – 10%
10% +
FNMA / HUD
Life Companies
SBA / USDA
Commercial Banks
Private Companies
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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
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Fundamentals of Commercial Lending: Chicago Financial Services

8. Transaction Time Comparison
Transaction Time
21 – 30 days
45 – 60 days
60 – 90 days
90 – 120 days
120 + days
Private Companies
Commercial Banks
FNMA / HUD
Life Companies
SBA / USDA
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Fundamentals of Commercial Lending: Chicago Financial Services

9. Transaction Type Comparison
Transaction Type
Stabilized Property
Limited Construction
Partial Rehab Construction
Full Rehab Construction
New Construction
FNMA / HUD
Life Companies
Commercial Banks
Private Companies
SBA / USDA
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10. Recourse Comparison
Recourse
Full
None
Private Companies
Commercial Banks
SBA / USDA
FNMA / HUD
Life Companies
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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
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12. Ideal Property Types
Ideal
Challenging

Apartment Buildings 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
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13. The Process
 Application submitted 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)
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14. Conclusion
 Matching a lender 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
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