After continuing rumors about the federal investigation of Colonial Bank, it was closed down by federal regulators Aug. 14. The good news is that Colonial's customers will suffer no losses, as the banking business and much of its loan portfolio has been acquired by BB&T - a healthy bank that will provide continuing service without skipping a beat. This news comes on the heels of the Riverside Bank failure that suffered a similar fate earlier this year, when it was acquired by TIB Bank. The bad news is that there are likely to be more bank failures on the horizon, especially here in Southwest Florida, where our economy continues to struggle.
Did you pick up on the phrase "much of its loan portfolio"? In these cases, the FDIC actually takes over non-performing loans for which the acquiring bank does not want to assume liability. The new bank will then perform additional reviews of its acquired loans for possible follow-up action with the borrowers. There are a couple of reasons why this process may be important to you.
First, the real estate assets that secure those loans now held by the FDIC will likely show up in the marketplace for purchase at some point in the future, often at attractive prices. A competent commercial real estate agent can guide you through that process, if you are looking for an opportunity, either as an investor or as an owner/user. Second, if your current commercial loan has been acquired by the new bank, you may be required to seek replacement financing with another lender, should they call in your loan.
Irrespective of a takeover, you may already be under similar scrutiny from your own bank, as they conduct continuing internal reviews of their loans and seek ways to improve their capital positions.
You might be asking, are there any lenders left out there? What if I want to exploit the current low real estate prices, so I will be well-positioned for the eventual recovery? The short answer is, yes, there are lenders who are actually lending on properties that can be supported with adequate income and cash flow. As you might expect, lending guidelines have tightened up considerably while the number of lenders in the market has dwindled.
You are going to need to do your homework to find those banks or "non-bank" lenders who are actively looking for business, as no local bank is going to put up a window sign that says "yes, we have no bananas today"!
As I shared with you in April, the Small Business Administration (SBA) has temporarily eliminated major fees and raised guarantees on some 7(a) loans up to 90 percent, as part of the Federal Recovery Act. For owner/users whose businesses are weathering the economic downturn, those benefits are major incentives to act now, as these special programs are scheduled to expire by year's end. On a national basis, there are SBA lenders who specialize in different classes of property (retail, professional office, industrial, automotive etc.) and offer loan programs that may not be generally available from local banks. Those lenders who are designated as PLPs (Preferred Lender Program) are carefully selected by the SBA and given significant authority to make final credit decisions in-house. Be sure to check with your prospective lender, as that designation can greatly speed up the process and increase the likelihood that your loan will be approved, once it has passed a preliminary review. SBA loans can be highly leveraged, with LTV's (loan-to-value ratio) as high as 90 percent, and may also include build-out, equipment and working capital, for example. Don't miss this opportunity, if your business can support it.
Not surprisingly, conventional loans for businesses and investment properties have far more conservative guidelines for qualification nowadays. Strong income must be present, and may also be considered from another source. Underlying real estate assets may also include cross-collateralized properties. Creative financing might include cash proceeds from stocks and bonds that are pledged against a low-interest "securities" loan for those who are fortunate enough to own a portfolio that still has substantial value. That program avoids the need to cash in securities and incur capital gains or losses.
There are equipment financing and credit card factoring programs - tools to improve cash flow and fund business operations. There is even an SBA America's Recovery Capital (ARC) loan program (an interest-free loan) that provides up to $35,000 in short-term relief for business owners, as a tool to help weather the economy. The word on the street is that most banks are only offering the ARC program to their existing customers, so check with the SBA office in Miami for guidance - www.sba.gov.
Navigating today's commercial lending landscape will require diligence and determination. I suggest that you align yourself with a trusted adviser (banker or broker) who has knowledge of and access to a broad set of lenders and programs, well beyond the local market, to maximize your chances for success.
-Gary King, MBA (and affiliate board member of the SW Florida District CCIM), is a commercial
First, the real estate assets that secure those loans now held by the FDIC will likely show up in the marketplace for purchase at some point in the future, often at attractive prices. A competent commercial real estate agent can guide you through that process, if you are looking for an opportunity, either as an investor or as an owner/user. Second, if your current commercial loan has been acquired by the new bank, you may be required to seek replacement financing with another lender, should they call in your loan.
Irrespective of a takeover, you may already be under similar scrutiny from your own bank, as they conduct continuing internal reviews of their loans and seek ways to improve their capital positions.
You might be asking, are there any lenders left out there? What if I want to exploit the current low real estate prices, so I will be well-positioned for the eventual recovery? The short answer is, yes, there are lenders who are actually lending on properties that can be supported with adequate income and cash flow. As you might expect, lending guidelines have tightened up considerably while the number of lenders in the market has dwindled.
You are going to need to do your homework to find those banks or "non-bank" lenders who are actively looking for business, as no local bank is going to put up a window sign that says "yes, we have no bananas today"!
As I shared with you in April, the Small Business Administration (SBA) has temporarily eliminated major fees and raised guarantees on some 7(a) loans up to 90 percent, as part of the Federal Recovery Act. For owner/users whose businesses are weathering the economic downturn, those benefits are major incentives to act now, as these special programs are scheduled to expire by year's end. On a national basis, there are SBA lenders who specialize in different classes of property (retail, professional office, industrial, automotive etc.) and offer loan programs that may not be generally available from local banks. Those lenders who are designated as PLPs (Preferred Lender Program) are carefully selected by the SBA and given significant authority to make final credit decisions in-house. Be sure to check with your prospective lender, as that designation can greatly speed up the process and increase the likelihood that your loan will be approved, once it has passed a preliminary review. SBA loans can be highly leveraged, with LTV's (loan-to-value ratio) as high as 90 percent, and may also include build-out, equipment and working capital, for example. Don't miss this opportunity, if your business can support it.
Not surprisingly, conventional loans for businesses and investment properties have far more conservative guidelines for qualification nowadays. Strong income must be present, and may also be considered from another source. Underlying real estate assets may also include cross-collateralized properties. Creative financing might include cash proceeds from stocks and bonds that are pledged against a low-interest "securities" loan for those who are fortunate enough to own a portfolio that still has substantial value. That program avoids the need to cash in securities and incur capital gains or losses.
There are equipment financing and credit card factoring programs - tools to improve cash flow and fund business operations. There is even an SBA America's Recovery Capital (ARC) loan program (an interest-free loan) that provides up to $35,000 in short-term relief for business owners, as a tool to help weather the economy. The word on the street is that most banks are only offering the ARC program to their existing customers, so check with the SBA office in Miami for guidance - www.sba.gov.
Navigating today's commercial lending landscape will require diligence and determination. I suggest that you align yourself with a trusted adviser (banker or broker) who has knowledge of and access to a broad set of lenders and programs, well beyond the local market, to maximize your chances for success.
-Gary King, MBA (and affiliate board member of the SW Florida District CCIM), is a commercial
No comments:
Post a Comment