Commercial Loans Blog

Recovery Zone Facility Bonds

Posted by George Blackburne on Sun, May 30, 2010

Construction Loans for Large Commercial Projects

Bond financing is the best way to finance the construction of large commercial projects today. Most commercial banks just are too scared right now to make large commercial construction loans.

In order to qualify for bond financing, the project must be commercial in nature. Bond financing cannot be used to build or finish residential subdivisions, residential condo projects, or multifamily projects. Mixed used projects - apartments over retail - may qualify if more than 20% of projected income is from non-residential sources, such a commercial rental income, laundry income, and vending income.

A bond attorney must eventually draft a very intensive set of trust documents, so bond financing is economically infeasible for construction projects of less than $4 million.

Bond financing is a little cheaper than a conventional commercial construction loan. The bonds are typically issued for 30 years at a fixed rate. If the project qualifies for tax-exempt status, the rate will probably be between 6.25% and 6.75% today. Commercial construction loans cash flow very well at only 6.50%.

A lot of developers are surprised to learn that they can now issue tax-exempt bonds. These bonds are not issued by any city, county or state. These bonds are actually issued by the developer. How is this possible?

A private developer can only issue tax-exempt bonds if he can secure a precious allotment of the right to issue tax-exempt bonds made available by the Federal economic stimulus bill of 2009. It's all about securing one of these precious allotments.

Developers are also pleasantly surprised to learn that no credit-enhancement is required. These bonds are welcomed by a hungry market of municipal bond buyers, even though the bonds are unrated. The reason why is because many savvy municipal bond investors no longer trust the good faith and credit of most states, counties and cities.

While the low interest rates on these bond deals are great, what's even greater is that finally developers can get their large commercial construction projects financed. If a developer is depending on a bank to make a large commercial construction loan today, it is very unlikely that his deal will ever get funded.

Bond refinancing cannot be used to refinance existing commercial projects. The proceeds must be used for new construction or extensive renovation.

Are you seeking bond financing for a large commercial construction project? Please call me, George Blackburne, at 574-360-2486 or email me at george@blackburne.com.

Topics: commercial construction loan, bond financing, facility bond, recovery zone facility bond

Business and Industries Loans (B&I Loans) from the USDA

Posted by George Blackburne on Wed, May 26, 2010

It's a Terrific Commercial Loan Program if Your Property is Located in a Small Town

The USDA Business and Industries Loan (B & I Loan) Program is a Federal loan guarantee program that is designed to encourage the commercial financing of rural businesses. The reason why the Federal government is involved is because it wants to create and save rural jobs and improve the economic and environmental climate of rural communities.


Are you ready to apply for a USDA B&I loan? Please call Tom Blackburne at 574-210-6686 or email him at tommy@blackburne.com.


Here's what makes a B&I loan different: The Business & Industry Loan program is lender-driven. The USDA guarantees the loan rather than lending directly. A commercial lender requests the B & I guarantee, and, if it is approved, the commercial lender makes and services the loan.

The benefits of the B & I Guaranteed Loans Program for businesses is that the borrower gets a higher loan amount. The reason why is because the guarantee strengthens the loan application, allowing the bank to feel comfortable with a smaller equity injection.

B&I loans also offer lower interest rates and longer repayment terms. This greatly assists businesses that may not qualify for conventional commercial real estate financing, which provides the rural business greater stability and leads to greater growth, expansion and rural employment.

Below is a list of the authorized uses of the loan funds. A borrower must be engaged in, or proposing to engage in, a business that will (1) Provide employment; (2) Improve the economic or environmental climate; (3) Promote the conservation, development, and use of water for aquaculture; or (4) Reduce reliance on nonrenewable energy resources by encouraging the development and construction of solar energy systems, and other renewable energy resources.

Authorized Loan Purposes:

(1) Business and industrial acquisitions, construction, conversion, expansion, repair, modernization or development costs.

(2) Purchase of equipment, machinery or supplies.

(3) Start-up costs and working capital.

(4) Processing and marketing facilities.

(5) Pollution control and abatement.

(6) Refinancing for viable projects, under certain conditions.

(7) Purchase of start-up cooperative stock for family sized farms where commodities are produced to be processed by the cooperative.

Bottom line, the USDA Building and Industry Loan (B&I Loan) program is a terrific program if the commercial property is located in a town of less than 50,000 residents. A great many small motels are financed using the B&I loan program.


Are you ready to apply for a USDA B&I loan? Please call Tom Blackburne at 574-210-6686 or email him at tommy@blackburne.com.

Topics: business and industries loan, rural commercial loan, USDA B&I Loan, USDA Business and Industries loan, USDA commercial loan, USDA lender, USDA loan, B&I commercial loan, B&I lender, B&I loan

Commercial REO Sales and the Stalking Horse Bid

Posted by George Blackburne on Wed, May 19, 2010

Stalking Horse Bids Arise in Connection with Bankruptcy Sales

Today I received an email announcing the bankruptcy court-ordered auction of a beautiful office tower in San Francisco. The flyer said the auction was subject to a $35 million stalking horse bid. What on earth is a stalking horse bid?

A stalking horse bid is an initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company. From a pool of bidders, the bankrupt company chooses the stalking horse to make the first bid.

This method allows the distressed company to avoid low bids on its assets. Once the stalking horse has made its bid, other potential buyers may submit competing bids for the bankrupt company's assets. In essence, the stalking horse sets the bar so that other bidders can't low-ball the purchase price.

Do you need a commercial loan to buy a commercial REO? Do you need to refinance your existing commercial mortgage? You can apply to 750 commercial real estate lenders in just four minutes using C-Loans.com. And C-Loans is free!  Click here to apply for a commercial mortgage loan.

Topics: commercial foreclosure, commercial REO, stalking horse bid

Commercial Mortgage Fee Agreements

Posted by George Blackburne on Tue, May 11, 2010

I've Figured Out How to Make Commercial Borrowers Comfortable Enough to Sign Loan Broker Contracts

There is an old saying among horsemen, "If you haven't been thrown, you haven't ridden very much."

The same is true for commercial mortgage brokers. If you haven't been cheated out of a $20,000 loan brokerage commission, you haven't been brokering commercial mortgage loans for very long.

Obviously a commercial loan broker needs to get his principals to sign a mortgage broker fee agreement. The problem is that the borrowers are too scared to sign one. They think they are going to be forced to pay a fee that the commercial mortgage broker didn't earn.

This week I accidentally stumbled into a technique that helps to make the borrower feel comfortable enough to sign a loan broker fee agreement. Here is the technique:

Commercial borrowers will feel comfortable enough to sign a fee agreement ... if they are allowed to exclude five lenders from your non-circumvention clause.

Here's why it work: Borrowers will seldom come straight to a commercial mortgage broker. They will first submit their loans to a handful of banks. There is always the chance that one of these original banks will finally come through for the borrower, so the borrower is loathe to sign any agreement that seems to interfere with this possibility.

Now when I send my fee agreement to a borrower, I always tell the borrower, "Feel free to attach an addendum that excludes up to five lenders."

Are you a commercial mortgage broker who is having trouble collecting your fee? Order our 90-minute video training course, Fee Collection for Mortgage Brokers.

Topics: fee agreement, loan broker contract, loan broker fee agreement, mortgage broker contract, mortgage broker fee agreement