Commercial Property Financing

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Commercial Property Financing

Q: What types of properties can be financed?
A: We can finance a variety of different property types such as restaurants, industrial factories, retail shopping centers, and many others.  (See our list of properties that can be financed)  
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Q: What sized transactions can be financed?
A: We can place commercial real estate financing proposals over a broad range of size.  Usually the smallest sized transactions with which we work are $200 thousand.  Up from that value, there is really no ceiling on the size of the proposal which we can consider.  We have the ability to place financing up to and beyond $50 million.
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Q: I am not sure if I'm located in your working region?
A: We believe that our location is the online community.  We work with clients who understand and appreciate the powerful benefits of working over the world wide web without geographic constraint.  We are able to work with clients in any geographic region with few exceptions. 
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Q: What are your rates?
A: Because Broadgate is a business financing brokerage and consultancy, we do not carry our own rates but rather have access to the rates of dozens of different financial lenders.  These rates are usually based on some index such as the Prime Rate, Cost of Index Funds, or Treasury Bill Rate.  For example, a rate might be quoted as Prime + Margin.  The margin is based on factors such as loan size, industry risk, maturity of note, and many others.  This margin is key to saving you money, and as our job at Broadgate we work to make sure that your margin is as low as possible.  
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Q: What type of business structure must I have?
A: We work with businesses that are organized as partnerships, limited liability companies, corporation, non-profit organizations, and trusts.
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Q: Is there a minimum credit score?
A: Although we can consider clients with any credit score, it is usually best to have a credit score of 550 or higher.  With scores lowest than this, it becomes much harder to properly place financing proposals with terms and rates that our clients find acceptable.  It is usually best to wait a period of time and build a higher credit score before pursuing commercial financing.
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Q: What is Loan-to-Value ratio (LTV) and Debt Service Coverage Rate (DSCR)?
A: These two financial figures are probably the most important in any real estate mortgage proposal.  Lenders will use these two figures to determine the amount of capital you are able to borrow. The loan-to-value ratio as its name implies relates the principle portion of loan to the appraised value of the real estate.  The debt service coverage ratio is a measure of your incomes ability to make debt payments.  DSCR includes principle and interest paid on a loan.  Typically expect LTV's to be 70% although some special programs allow LTV's of up to 90% at higher costs.  Expect DSCR's to be at least 1.20 with some lenders pushing it even higher to 1.40 or 1.50.  (See an example of how LTV and DSCR are calculated)
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Q: What are your collateral requirements and how do they relate to my financing proposal?
A: Collateral is very important to consider in any debt financing proposal.  The value amount of collateral must usually cover 100% of the debt for the life of the loan.  In most real estate mortgages, the property itself serves at the primary collateral for the loan.  In some cases, however, additional collateral such as accounts receivable, business equipment, inventory, etc. might be used to collateralize a commercial loan.
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Q: Is there a personal guaranty?
A: This question does not have a definite yes or no answer.  Most businesses that are either new, small, or with a less than solid financial history can usually expect to have to personally guaranty any mortgages.  Anyone with a 20% or more stake in the company will have to guaranty the debt.  Businesses with that are well established with solid financial standing can negotiate out of personal guaranties.  There are exceptions in both cases which makes it hard to state a definitive answer.  
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Q:Is there a prepayment penalty if I later choose to pay off my mortgage?
A: A prepayment clause is usually negotiable in most cases for clients with good credit ratings.  Where prepayment penalties can be a tough nut to crack is when a client with a fair or poor credit score obtains financing.  Lenders will often want to lock in a prepayment penalties because the mortgages carry higher rates than those for clients with better credit ratings.
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