Scotsman Guide - November 2008 Commercial Edition

Hard Money Lending 101

Use this guide to save time, close more deals and give your client’s loan the best chance for approval. A well-organized loan summary should include the following essential information:

Executive Summary – A concise, but thorough, overview that includes:

• Description of Property & its Estimated or Appraised Value, Square Footage, Number of Units.

• Loan Amount & Use of Funds – Debt owed/Liens on the property/Cash out?

• Date of Purchase & Price – How much cash has the borrower invested?

• Debt Service – How will the borrower make monthly loan payments? Will it produce income or is an interest reserve needed?

• Loan Term Requested – Avatar offers loan terms up to 2 years. Payments are interest only and no prepayment penalties apply.

• Exit Strategy – Renancing? Selling?

• Equity – Avatar lends up to 65-70% LTV on purchases and renances on income producing commercial properties. Avatar requires borrowers to have a minimum of 20% equity in their projects. Some secondary nancing is allowed.

• The Story – Why are you seeking hard money rather than conventional nancing? What ‘skeletons in the closet’ or ‘bumps in the road’ does Avatar need to know about in order to provide you with a quick, reliable answer?

Color Photos of the Property and/or Appraisal – At least three shots each of interior, exterior and the neighborhood. Avatar does not require a current appraisal to review the loan.

Operating Income (P & L) – Most recent 2 years on the subject property; summary of lease agreements and rent roll. If owner occupied, provide operating statement from the business.