Midwest Capital Corp.: offering a longer-term mortgage at higher loan-to-value.
"We provide financing from $500,000 to $5 million," says founder and president Steven Young. "We are a highly competitive alternative to traditional bank financing. Banks typically use a short-term credit model to make lending decisions. Our money comes from longterm investors, so we can offer a longer-term mortgage at a higher loan- to-value."
Midwest Capital started in 2000 and most of its loans are originated for customers in central Indiana, although the company has the capacity to lend outside of the state.
This month, the privately owned enterprise is scheduled to move its single location to Fishers. "We feel we can better serve our market by moving. Most of our referral base is on the north side of Indianapolis," says Young, who for the past 19 years has specialized in loans to small and medium-size companies. "This year we will produce about $25 million in funding," Young notes. "This represents about a 100 percent increase over last year."
Young, who was previously based out of Indianapolis as a regional sales manager for First Union National Bank, says his own company is able to provide more financing options. "Most of our borrowers don't peg a lot of their decisions based on the performance of the stock market," he explains. "However, interest rates obviously have a big impact on our programs. Right now, with a flattened yield curve, long-term rates are as attractive as short-term rates. Typically, the longer you lock a rate, the more expensive that money becomes."
Midwest Capital's most popular product is a 25-year, fixed-interest loan. "Our long-term rates are pretty close to what a borrower would get at the bank for a prime-based loan," Young says. "A lot of commercial banks offer a similar type loan as we do, at a spread over the U.S. prime rate. The U.S. prime rate has gone up 12 times in the past 24 months (as of mid-October), but long-term rates have been extremely slow to change in relative terms. Historically, this is unusual."
The company secures funding through institutional lenders, referred to as the Secondary Market. "This market is looking for opportunities to place funds into long-term, commercial real estate-backed loans," Young notes.
Recently Midwest Capital refinanced a Small Business Administration (SBA) mortgage on a building in northern Indiana where a dentist is in solo practice. "The dentist was on a floating prime-base rate," Young says. "We gave him a $960,000 loan and a 25-year fixed rate. The rate was basically equal to the floating rate on his SBA loan. Now the dentist can focus on being a dentist and doesn't have to worry about any more future rate hikes."
Young's younger brother, Edward Young, CPA, acts as vice president and chief financial officer at Midwest Capital. "I really enjoy helping small to medium-size businesses with their need for funding," he says. "I get all excited when I'm ready to close a loan because we are finally making it a reality for that borrower."
"As for clients, we're not that industry-specific. We loan to medical offices, service businesses, manufacturing and general offices," Young states. "I think we're also very service-oriented. We focus on getting a loan approved and closed. And because we're pretty much commission-based as an organization, Midwest Capital doesn't get paid until a transaction is completed. We're very serious about getting our job done."
Last Christmas, a borrower approached Midwest Capital about refinancing a loan for an investment property he owned in Indianapolis. "We were able to close the loan in two weeks--right after the New Year," Young recalls. "This is a really quick turnaround time. Our typical funding time from start to finish is 30 to 45 days."
Jan Reid is the closing specialist at Midwest Capital, with over 25 years of process administration. "Every day my job is a new challenge because every closing is totally different," Reid says. She estimates the company will complete 30 closings this calendar year. "Our business picks up a lot between October and December," she says. Community involvement and networking with the company's referral base (bankers, CPAs, commercial real estate brokers) generate the majority of business.
A manufacturing firm came to Midwest Capital shortly after Thanksgiving last year. The firm wanted to refinance a mortgage valued at about $1.5 million, so it would have improved cash flow the following year. "From start to close, it took us less than three weeks," Reid says. "This included collecting all the documents. There were also several corporations involved, so there were a lot of legal documents. Our closings are fine-tuned. At the point when an application is sent in for consideration, I know what documents are needed and I'm starting to get everything organized for the closing. Our company is also very good about keeping in close communication with the customer as to what is required from him to move the process forward expeditiously. "I'm looking forward to our move to the north side of town and getting to know all the businesses," Reid conveys. "We want to help these businesses grow."
"I was impressed with Steve and the team he had put together," says business development officer Jeff Jex, who joined the company last September. His previous employer had started in small-business banking, but had started to veer away from that segment. "At Midwest Capital, we're able to tailor our various programs to the unique needs of each client," says Jex.
Offering a fully amortized mortgage loan out to 25 years "is quite unusual for the Indianapolis market," points out Jex, who at one point in his career was recognized as one of the top originators of SBA 504 loans in the state of Indiana. "The commercial banks prefer to limit their risks, so they normally extend credit for only five to 10 years. At our company, the client knows the loan is there for the next 25 years and doesn't have to worry about refinancing."
Midwest Capital refinanced a mortgage of an Indianapolis law firm that had recently purchased and renovated a building. "The lender that helped the law firm finance the purchase of the property did not offer them long-term financing," Jex says. "We were able to provide a fixed-rate loan in the amount of $2.8 million for 25 years, with monthly payments that were less. By saving money on a monthly basis, the law firm can continue to finance its growth."
Investment real estate is Midwest Capital's newest product. "Historically, our company has focused on financing owner-occupied properties," Jex says. "But recently, we began financing non-owner occupied investment real estate. This includes small retail centers, multi-tenant office buildings and apartments. We see this as a developing segment of our business."
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|Publication:||Indiana Business Magazine|
|Date:||Nov 1, 2005|
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