A CMBS Loan, also known as Conduit Loan, is a type of commercial real estate loan that is secured by a first-position mortgage on a commercial property. These loans are packaged and sold by Conduit Lenders, commercial banks, investment banks, or syndicates of banks.
DSCR : Minimum 1.25x DSCR on CCRE underwritten net cash flow.
Definition: A mortgage on property in which you do not live is considered a non-owner occupied mortgage.
Eligible applicants include for-proﬁt small businesses with a net worth less than $15 million and $5 million in proﬁt after taxes.
Uses can vary but typically encompass acquisition of land and existing buildings, site improvements, building renovations, leasehold improvements, new construction, machinery & equipment with a useful life of at least 10 years. Refinancing of existing commercial real estate and/or equipment debt may be eligible. Loans may not be used for working capital, venture capital or investment purposes.
The gross amount of the loan can be up to $5 million for regular loans and $5.5 million for Public Policy Goal loans as well as small manufacturers or 40% of the total eligible project costs (whichever is less). Additional equity requirements will reduce the amount. Minimum loan size is $50,000.
Existing businesses (must be in operation for 2+ years) must provide a minimum of 10% of the total project cost. New businesses or new ownership of businesses must provide a minimum of 15% of the total project cost. If the project involves special use assets, an additional 5% will be required.
Restricted Property Types Gas Stations without c-store, Restaurants.
Management/Franchise Agreement ! Related party or 3rd party management contract cancel-able on 30-day notice. ! At least 10 year term remaining for franchise agreement.
What is a lease hold improvement loan?
The first underwriting criteria that needs to be addressed is collateral. For a leasehold improvement loan, the money will go to improve someone else’s property and chances are, the owner is not willing to provide a mortgage on the property to secure the loan. So we need to look at what other collateral would be available. For most Lease Hold Loans, the project collateral is generally sufficient to secure the loan. But in the case of leasehold improvements, other real estate property and/or equipment would need to be considered. Even if such business collateral is available, depending on the value and existing liens, the Lease Hold Loan could very well need to look at personal assets to secure the loan as well. This typically means the owner(s) personal residence(s) or other investment property they own.
The second underwriting criteria, which is more directed at the closing of the Lease Hold Loans, is the Assignment of Lease and Landlord’s Waiver. When a substantial portion of the loan proceeds are to be used for leasehold improvements or a substantial portion of the collateral consists of leasehold improvements, fixtures, machinery, or equipment that is attached to leased real estate, we must obtain: an Assignment of Lease with a term including renewal options that equals or exceeds the term of the loan and a requirement that the lessor provide a 60-day written notice of default to us with option to cure the default. A Landlord’s Waiver must also be obtained as that gives us access to the leased premises and facilitates the liquidation of the collateral on the borrower’s premises and should be obtained for all Lease Hold Loans with tangible personal property as collateral.
While leasehold improvements are vital to some small businesses because they are not ready or cannot afford their own property, using the Lease Hold Loans to partially finance those costs can become problematic, especially if there is no other collateral available to secure the loan and/or the owner of the property will not abide by the requirements of the lease. However, for those situations where all the pieces can come together, this loan can be an excellent choice for small businesses needing to do leasehold improvements.
Lease Hold Improvement and Start up Business. This program assists borrowers to secure loans either for business expansion or starting up a new business, and generally does not own the space but rather has leased space to operate a business.
New equipment, renovations and working capitol can also be included in this type of loan.
For Business expansion, renovation or new equipment you must show that this loan will not only increase revenue but create jobs in the community.
There is a wide variety of leasehold improvements that can be performed.
Start-up funding is usually used for exterior and/or interior renovation to accommodate a business move-in.
Expansion funding needs are usually, but not necessarily limited to when your business is growing and it’s time to expand your operations.
A common term for a leasehold improvement loan is 5 to 7 years, depending on the improvements. In addition, interest rates are usually fixed and depend entirely on current market factors and the overall risk of the business and/or project.
The cost of leasehold improvements over the capitalization threshold of $50k should be capitalized.
Interior floor finishing, including carpet, vinyl and tile.
Leasehold improvements should not include maintenance and repairs done in the normal course of business. Further, movable equipment or office furniture that is not attached to the leased property is not considered a leasehold improvement.
the estimated useful life of the improvement.
Leasehold improvements do not have a residual value. Improvements made in lieu of rent should be expensed in the period incurred. If the lease contains an option to renew and the likelihood of renewal is uncertain, the leasehold improvement should be depreciated over the life of the initial lease term or estimated useful life of the improvement, whichever is shorter.
Whether you are just leasing the space or buying the building we offer different products to assist you.