Help with commercial building loan!

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billjohnson
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Help with commercial building loan!

Post by billjohnson » Tue Feb 28, 2017 11:29 am

In the process of purchasing a commercial building that will be used for a medical practice. Building will be roughly 1.4 million. We have about 300k that COULD be used as down payment. Our credit is very good, and pro forma business plan looks good.

I know next to nothing about commercial/business loans. My first thought is something like an SBA 504, but seems like an overwhelming number of options. After building loan is secured, we will need another million or so for the practice itself.

Anyway, what would y'all suggest for loan options to secure the building? Any advice is much appreciated!

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dm200
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Re: Help with commercial building loan!

Post by dm200 » Tue Feb 28, 2017 12:08 pm

billjohnson wrote:In the process of purchasing a commercial building that will be used for a medical practice. Building will be roughly 1.4 million. We have about 300k that COULD be used as down payment. Our credit is very good, and pro forma business plan looks good.

I know next to nothing about commercial/business loans. My first thought is something like an SBA 504, but seems like an overwhelming number of options. After building loan is secured, we will need another million or so for the practice itself.

Anyway, what would y'all suggest for loan options to secure the building? Any advice is much appreciated!
Can (or will) the seller take back a mortgage? Perhaps on part?

Check with credit unions. More credit unions are doing this type of "business lending".

billjohnson
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Re: Help with commercial building loan!

Post by billjohnson » Tue Feb 28, 2017 12:19 pm

dm200 wrote:Can (or will) the seller take back a mortgage? Perhaps on part?
Sorry, but I'm exactly sure what this means? We are now in contract negotiations, and perhaps can request more time to secure the loan. So probably seller has no intentions of being involved in the financing?

On a side note, is it reasonable to ask for 90 days to secure a loan? Think the current contract states 45 days. Looks like some of these SBA loans take quite some time.

Thanks.

PS. Not sure this is important, but the building will be new and built to spec.

cwilm79
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Re: Help with commercial building loan!

Post by cwilm79 » Wed Mar 01, 2017 9:25 am

We are looking to finance a commercial property at this time as well but not as an owner occupant. That should open up even more options for you. I would check with all the local lender you have a relationship with or are reputable in your market, you should be able to get rates in the mid to low 4% range on a 7 year option and possibly some 10 year options. Another option is looking for a broker that can set you up with a permanent lender like a life insurance company if you plan to hold the building long term. It is significantly more fees up front but you can definitely get a 10 year loan and probably 15 or 20 fully amortizing. They also tend to have the best rate.

These are the options we have looked at but want to learn more about the SBA 504 option, can you advise on how these compare and if worth considering or too much of a headache? About all I know is SBA holds a 40% loan while the local lender holds 50% and borrower puts in 10% equity.

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Hub
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Re: Help with commercial building loan!

Post by Hub » Wed Mar 01, 2017 9:44 am

The nice thing about the SBA options is they'll let you roll in the start-up cost airball into the mortgage and not many conventional commercial banks will do that otherwise. Compare and contrast the 504 and 7a programs closely. At that loan size I see more 7a loans than 504, but either could work for your situation. The downside is that they're a pain compared to conventional loans and they take a long time to get closed. Plus their fees are higher.

Some big banks have doctor / dentist / vet programs where they'll roll in the startup finish out and equipment costs into a mortgage loan without you having to go SBA so I would look into that also.

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Sandtrap
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Re: Help with commercial building loan!

Post by Sandtrap » Wed Mar 01, 2017 9:51 am

billjohnson wrote:In the process of purchasing a commercial building that will be used for a medical practice. Building will be roughly 1.4 million. We have about 300k that COULD be used as down payment. Our credit is very good, and pro forma business plan looks good.

I know next to nothing about commercial/business loans. My first thought is something like an SBA 504, but seems like an overwhelming number of options. After building loan is secured, we will need another million or so for the practice itself.

Anyway, what would y'all suggest for loan options to secure the building? Any advice is much appreciated!
Some random thoughts from a R/E Developer perspective that may be helpful to you.
1
Are you the sole user or the entire commerical building or are there other existing tenants or tenant spaces?
2
If there are other tenant spaces and especially an "anchor tenant" with a long existing lease, then the financial burden on you may be less.
3
If it is a multi-tenant commercial building, be sure to get the "actual rent rolls" and "financial statements" vs the "pro forma" documents.

I hope this is helpful and actionable information that you can use.

gclancer
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Re: Help with commercial building loan!

Post by gclancer » Wed Mar 01, 2017 10:11 am

Look up your local "Certified Development Company" and have a conversation with them about a 504/CDC SBA Loan. That's probably the best option but it's viability will depend on how many employees your medical practice has (back of the envelope math suggests you'll need 8 or 9). You're not getting yourself into a hard sell situation with the CDC so it's definitely worth at least having the conversation.

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