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2008 has been a very tricky year for all involved in the commercial mortgage business and SBA commercial loans are no exception, to the surprise of many. Numbers are down across the board and some estimates are coming in that the SBA 7a program (the most popular) will have closed roughly half of what they did in 2007, in terms of loan volume. Number of closed loans is also way down.

Many industry players have been really shocked by this outcome. After all, the government set the program up in an effort to help stimulate the economy and many players where betting that the SBA loans would be relatively stable and undamaged.

There’s seems to be a couple of key issues here that have slowed closings besides the obvious liquidity problems. For one and this is no surprise, both the SBA 504 and the 7a are expensive compared to conventional loans. From the broker’s perspective, selling the 2.75% SBA guarantee fee on the 7a program is no easy task. And it doesn’t matter to a lot of borrowers, especially those that are use to more competitive conventional loans, that the fee is rolled into the loan amount. Or that this might be their only real option.

Also, the quarterly adjustable rate is scaring some borrowers away as they contemplate what and where Prime might be going. We’ve had many borrowers talk about the Jimmy Carter days when Prime was in the 20%. So many borrowers are passing and just sitting on the sidelines waiting for conventional to come back. For example, we have several borrowers waiting that have hard money loans and would rather pay their double digit rates than refinance into an adjustable rate. The issue is that they don’t want to have to refinance again in a few years and pay for the third party costs again. Of course this assumes that conventional loans will be back.

Another issue has been that the SBA recently rewrote their 800 page manual and made it a more manageable 200 pages. A great effort for more simplicity and efficiencies have unfortunately caused a lot of confusion as many underwriters have been left with unanswered questions about what the new guidelines are, exactly. This confusion and doubt has been an incentive for some banks to pass on the SBA programs. Unfortunately the timing on this couldn’t have been worse.

What are the liquidity issues? As many readers are aware most banks that fund SBA loans do so with the intent of selling the debt off onto the commercial secondary market. Now that this market is so beat up and that there are few buyers, banks have to hold onto the debt on their balance sheet. For some banks this goes against their business model and for other it’s not even an option as they have their own liquidity issues. Many banks can’t or don’t want to be portfolio lenders.

However, despite the problems it is worth noting that the SBA loans are still standing and there are banks that are still closing loans with the SBA guarantees. While conventional is basically out completely for the time being. For example, try getting a car wash loan done right now without the SBA guarantee. Or a hotel loan or a restaurant loan. There are very few conventional loans out there that will even discuss a special purpose property with you if it’s not going through a government sponsored program.

Author: Jeff Rauth
Article Source: EzineArticles.com
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There are many sources in which restaurant owners could turn to in search of restaurant funds. All of these funding methods have both advantages and drawbacks. Therefore, it is up to restaurant owners to evaluate their individual businesses, and determine which funding options best suit them.

Traditional Bank Loan

Explanation

A traditional bank loan is a business loan that a restaurant owner can receive through a bank. The money must be repaid over a certain period of time. Many banks offer business loans to small business owners who meet specific requirements, some of these loans are even backed by the Small Business Administration (SBA).

Benefits

o SBA loans available
o Low interest rates

Pitfalls

o Strict, often hard-to-meet requirements
o Long waiting/processing periods

Restaurant Loan (Merchant Cash Advance)

Explanation

Merchant cash advance providers advance restaurant owners up to $500,000. They utilize credit card factoring, allowing the restaurant owner to repay the advance through a small percentage of his/her business’s future credit card sales.

Benefits

o Up to $500,000 in business funds
o Minimal requirements
o Unsecured
o Excellent credit not required
o Flexible repayment procedure
o Renewable
o 7-10 day funding

Pitfalls

o More expensive than other methods
o Not suitable for restaurant owners who do not process credit card sales

Personal (Family, Friends, Savings, etc.)

Explanation

Money accumulated in savings accounts as well as money borrowed from or donated by friends and family can be used to fund a restaurant.

Benefits

o If taking money from your own savings, it does not have to be paid back
o No stringent requirements

Pitfalls

o May leave you with little to no money for emergencies
o Can potentially ruin and/or strain relationships

If after evaluating your restaurant, you realize that a merchant cash advance is your best option, you can get a free online quote and apply online.

Author: Gaston Castro
Article Source: EzineArticles.com
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Many borrowers are surprised to learn that they may actually have more options on restaurant loan options for free standing, non franchise properties than franchise restaurants. With conventional financing and SBA loans it’s almost a no brainer to go the franchise route. However, many CMBS lenders will not consider restaurant mortgages if the business is tied to a franchise agreement.

First of all CMBS lenders (commercial mortgage backed securities) are a nontraditional source of capital that due to their “back office” structure have produced some of the most creative and aggressive restaurant loan options in the industry. For example 85% financing and 30 year fixed rates on restaurants, with rates right in line with bank financing. They’re able to do this because the individual loans are pooled together and sold to investors in the form of bonds, which essentially reduces the investors risk due to the diversification of loan structure, building type, and geography.

CMBS lenders do not like the franchise agreement between the franchisee and franchisor. In essence, these agreements are very cumbersome and limit the rights of the lender in case of borrower default. It becomes more difficult for the lender to go after the collateral to get paid back. So, many of these creative restaurant loan options are not available to the borrower.

If your in a franchise agreement now, and own the property your business occupies, then consider the SBA 7a loan for your refinance. Many borrowers are under the wrong impression that they cannot refinance with SBA loans. The exception are if the new loan will save the borrower 20% on their existing mortgage payment (this is on a cash flow basis), existing loan floats, has a balloon on it or if their existing interest rate will be reduced by 2% or more (keep in mind that most rates are currently in the 6%’s) from the proposed 7a loan refinance.

Also, another major misperception about the SBA 7a loan is that it’s always a floating rate loan. 99% of the time this is accurate. However there are a few sources that offer this program as a 5 year fixed 25 year amortization loan.

If, and going back to the original point, you own your property and run a non franchise restaurant out of it, then you’ll have all three options available to you – CMBS, SBA and conventional. With CMBS loans you will have the option of 30 year amortization loans, rates fixed for as long as 30 years, loan to values as high as 75% on refinance and 85% on purchases.

Author: Jeff Rauth
Article Source: EzineArticles.com
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Restaurant financing was once very difficult to obtain but today there are many options for financing and restaurant loans are offered by various financial institutes as well as traditional banks.

There are many factors that will come into play when looking to obtain financing for your new restaurant. For example, the size of your restaurant, your experience, how much funding you are putting up, and how much funding you need.

Money makes the world go round and it definitely makes your restaurant go round. Whether you are opening your very first restaurant, moving your existing restaurant to a bigger location, remodeling, or adding new a new bar – it matters not, all of it entails restaurant financing, and restaurant loans are much different than regular business loans.

Restaurant loans can be challenging to obtain and frustrating for you. This just isn’t an industry that the banks like, so you need to be ready for rejection to occur. The good news is that there are loans available if you just persevere. Here are some tips to help you get that financing in place.

Explore

Explore various financing options. What works for someone else might not be right for you. So don’t be afraid to spend some time online to find the right loans for you.

Commercial Restaurant Loans

You may have trouble finding conventional restaurant loans, especially if this is a new venture without a proven track record, but it’s still worth a shot. The key is to be able to prove to the bank that you are really low risk. The banks job is to have assets to cover a percentage of the amount of money they lend, so take a little time to understand how this works.

SBA Loans

SBA loans are something that many aren’t familiar with. This is an alternative to the traditional restaurant loans offered by your bank. Through the private sector loans are granted through various lenders and the SBA will guarantee up to 85% of the principal. There are actually more than 500 lenders in Canada that offer SBA loans. If you are turned down on traditional restaurant loans, you may be a candidate for an SBA loan.

Investors

There are many individuals and companies that are interested in investing in new ventures including restaurants. Unlike restaurant loans investors own a portion of the business. You determine the agreement between you and the investor.

Seller Financing

If you are purchasing an existing restaurant many times the seller is willing to finance. Don’t be afraid to ask.

There you have it – restaurant loans are readily available, perhaps just not in the traditional form that we are so used to, but certainly in many other forms.

Author: Gordon Petten
Article Source: EzineArticles.com
Provided by: Canada duty