BaySierra Financial, Inc. (BSF) offers a broad variety of real estate loan products to our clients. BSF's agents are well versed in all aspects of real estate finance...

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BaySierra Financial, Inc. (BSF) has lending relationships with a wide variety of banks, mortgage bankers, and Wall Street "conduit" lenders. These lenders provide long term financing for owner / occupants, credit tenant and non-credit tenant borrowers.

Loan rates are generally fixed for the term of the loan 10, 15, 20 or 25 years or are variable rates loans adjusting every 1, 3, 5 or 10 years which adjust to indexes, such as LIBOR, matched maturity Treasury Bills, Prime Rate or similar indexes. Whether fixed or variable the amortization period are typically longer such as 20, 25 and; in some circumstances 30 years.

Fixed rate loans usually can be obtained by credit tenants or high quality borrowers with low loan to value and debt service ratios. Fixed rates, although they maybe attractive, generally have higher prepayment provisions, such as yield maintenance provisions; generally do not permit secondary financing at any time and; are not assumable.

Variable loan rates are the index plus some additional interest rate spread to arrive at the actual rate. Generally, the longer the adjustment period the higher the spread over the index, a shorter adjustment period the lower the spread. Most variable rate loans have less restrictive prepayment penalties; may allow for secondary financing and; may be assumable by a qualified party.

Commercial income producing properties are underwritten based on the quality and quantity of their lease income. Higher quality tenants are more sought after by lenders and command lower financing cost in the market place, many times long term fixed rates can be obtained. Average quality tenants such as those found in strip malls are less attractive to lenders and pay higher rates and most likely variable interest rates. The quantitative issues relate to the gross income stream, annual expenses and debt service coverage ratios of a property. Certain properties have higher per square foot rents based upon their location or the utility of the property. Anchor tenants, such as grocery chains, national retail marketers or publicly traded companies generally pay less per square foot for rent than satellite tenants such as non-chain retailers or local retailers or service providers.

Capitalization rates to determine value follow a similar pattern wherein anchor tenants have a lower capitalization rate resulting in a higher property value than an average tenant. Where turnover and collections are more of an issue a higher capitalization rate would dictate a lower value.

These issues should be addressed in an appraisal by a licensed California appraiser who has the skill, knowledge and experience to appraise the property. Selection of an appraiser is especially important to institutional lenders. Many times, a borrower learns that the appraiser that they have selected and has just completed the assignment is not on the lender's approved list of appraisers. We screen lenders for acceptable appraisers prior to ordering an appraisal. Lenders may want to collect the appraisal fee from the borrower and contract directly with appraiser.

SBA's 7(a) Loan Program

The Small Business Administration's most popular "loan product" is the 7(a). Like the SBA 504, the 7(a) may be used for real estate transactions, but offers a variety of other options:

  • To acquire equipment, machinery, furniture, fixtures, supplies, or materials.
  • For long-term working capital, including the payment of accounts payable and/or for the purchase of inventory.
  • To refinance existing business indebtedness which is not already structured with reasonable terms and conditions.
  • For short-term working capital needs, including
    Seasonal financing, contract performance, construction financing, export production, and for financing against existing inventory and receivables under special conditions; or
  • To purchase an existing business.

The SBA 504 program is a long term financing tool for economic development within a community, and provides growing businesses with long-term financing for purchases or refinancing of land and buildings.

Commercial real estate loans, regardless of the loan size, are sophisticated financing transactions and having a seasoned BSF agent representing you in the transaction gives you the best opportunity to obtain the best financing available.

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