High yield lending 101: a primer on alternative financing.High-yield lenders like SWH SWH Solar Water Heater SWH Swell Height SWH Southwest Harbor (Maine, USA) SWH Significant Wave Heights SWH Sheraton Waikiki Hotel (Honolulu, Hawaii) SWH Switching Hub Funding Corp. of Hackensack, NJ, provide commercial mortgage loans when conventional financing is not an option. The following provides answers to commonly asked questions about high-yield lending and how companies like ours play a critical role among today's commercial mortgage lending sources. Q. What is a high-yield commercial loan? A. High-yield loans (or hard-money loans) are short-term bridge loans for acquisitions, refinancings, turnaround/work-out situations, foreclosures and bankruptcies. Interest rates are significantly higher than conventional loans, but less expensive than having a partner. Q. What type of borrowers need high-yield financing high-yield financing See junk financing. ? A. High-yield loans are ideal for borrowers who are unable to obtain funding through a conventional source. Typically, they need the loan for opportunistic opportunistic /op·por·tu·nis·tic/ (op?er-tldbomacn-is´tik) 1. denoting a microorganism which does not ordinarily cause disease but becomes pathogenic under certain circumstances. 2. or problematic situations that require fast response and funding. Q. Why is it so expensive? A. SWH Funding clients pay for service. Our professionals can get through complicated loan requests quickly, often closing within a week or two after a conditional commitment is in place. Because the upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside realized through our funding is so significant, the interest rate rarely becomes an issue for our clients, who understand the time "value of money" and that they are paying for a valuable service. Q. What property types will SWH Funding consider? A. SWH Funding will consider income-producing properties such as apartments, retail/shopping centers, office buildings, hotels/motels, mobile home parks and restaurants, as well as non-income producing investment properties such as raw land construction, rehab developments, land assemblage assemblage: see collage. assemblage Three-dimensional construction made from household materials such as rope and newspapers or from any found materials. and condo/co-op conversions. We analyze each transaction during the due diligence Research; analysis; your homework. This term has caught on in all industries, because it sounds so "wired." Who would want to do analysis or research when they can do due diligence. See wired. process for "good risk" - to be sure that a property can be repositioned for sale or refinancing Refinancing An extension and/or increase in amount of existing debt. . Q. What property types will SWH Funding not consider? A. SWH Funding will not finance houses of worship, gravel pits Noun 1. gravel pit - a quarry for gravel stone pit, quarry, pit - a surface excavation for extracting stone or slate; "a British term for `quarry' is `stone pit'" or casinos. Q. What are the minimum and maximum loan amounts SWH Funding will consider? A. Loans range from $2 million to $100 million. Q. How fast can SWH Funding complete a transaction? A. SWH Funding can offer conditional commitments in 24 to 48 hours, with loans closing a week or two to 30 days after that, following due diligence. We find that it is usually the borrower who controls the "pacing" of the dosing, provided our attorneys are given the proper documentation in a timely manner. Q. If you have to do full due diligence, how can you get the loan closed so fast? A. The nature of our business dictates that we must be able to expedite due diligence proceedings. Our staff works very quickly to make sure everything is in order for an expeditious ex·pe·di·tious adj. Acting or done with speed and efficiency. See Synonyms at fast1. ex closing. Q. Why does SWH Funding only finance short-term loans? A. Terms longer than two or three years simply become too expensive for our borrowers. Our goal is to have them in and out of the loan as quickly as possible. Q. How much equity does a borrower need? A. The amount of equity needed depends on the quality of the real estate. Typically, we prefer 10 to 25 percent equity. Q. With such a high return, should SWH Funding be willing to take more risk? A. Not necessarily. Taking more risk for a higher return is a concept based on residential loans. Because SWH Funding finances multi-millions of dollars per loan, our risk must be minimized. A borrower does not pay us for "risk", they pay us for service. Q. Does SWH require personal guarantees? A. Yes. We analyze the merits of a project in its entirety, in conjunction with the involvement, capabilities and character of the principals. Because we fund problematic and opportunistic projects, we need to be sure that the principals are totally committed. Q. Does SWH Funding finance second mortgages, mezzanine loans A mezzanine loan is a relatively large loan, typically unsecured (ie., not backed by a pledging of assets) or with a deeply subordinated security structure (e.g., third lien on the property but non-recourse vis-a-vis the borrower). or joint ventures? A. Although it is not our regular business practice, we can finance these types of loans on a case-by-case basis. Q. How about fees? Are there up-front or third party fees? A. Clients pay a due diligence fee of .5 to 1 percent and closing fees of 4 to 8 percent. Broker/banker fees, third-party reports, the appraisal, and our attorney's fee attorney's fee n. the payment for legal services. It can take several forms: 1) hourly charge, 2) flat fee for the performance of a particular service (like $250 to write a will), 3) contingent fee (such as one-third of the gross recovery, and nothing if there is no are in addition to what we charge. Q. Does SWH Funding protect bankers, brokers and intermediaries for their fees at closing? A. Yes. However, we ask that they establish a fee agreement with the borrower in which the borrower commits to paying the agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations" stipulatory noncontroversial, uncontroversial - not likely to arouse controversy points at a closing (these points are in addition to those that we quote). Q. What is the best way to submit a loan request? A. Clients must complete a loan request summary, including a written narrative of "the story" of the loan request. For information, contact Kevin Clark Kevin Clark is an assistant men's basketball coach at the University of Rhode Island. He is probably most well-known for his stint as the head coach at St. John's during the 2003–2004 season. at (201) 343-3222, ext. 213, or visit our web site at www.swhfunding.com. Kevin S. Clark, Director of Marketing and Origination, SWH Funding Corp. |
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