If your business plan and cash-flow projections reveal that making loan payments will strain your company’s financial condition (or that you don’t have sufficient collateral), then you should explore equity alternatives. It’s simply not worth driving your company into bankruptcy solely to maintain maximum ownership and control.
You should also compare the level of debt financing you are planning to obtain against the typical ratios for businesses in your industry. Once you’ve figured out your optimum debt-to-equity ratio, you can look into the sources of debt financing, and the business and legal issues involved in borrowing funds from a commercial lender.
A proper debt-to-equity ratio for your business will depend on a wide variety of factors, including:
The impact that your obligation to make payments under the loan will have on the cash flow of your business,
Your costs relating to obtaining the loan,
Your need for flexibility in the capital structure so you can respond to changing economic or market conditions,
Your access to alternative sources of financing,
The nature and extent of your company’s assets (tangible or intangible) that are available as collateral,
The level of dilution of ownership and control that your shareholders (and managers) are willing to tolerate,
Certain tax considerations (interest payments are a deductible expense, but dividends are not).
a) What constitutes a good loan proposal?
A good loan proposal should include;
Summary of the request; This is an overview of the history of the company, the amount of capital needed, the proposed repayment terms, the intended use of the loan, and the collateral available to secure the debt.
Borrower’s history; This is a brief background of your company, finance structure, founders, stage of development and growth plans which may include; a list of your customers,suppliers, and service providers,management structure and philosophy, your main products and services, and an overview of any intellectual property you own or have developed.
Market data; This is an overview of trends in your business industry, the size of the market, your market share, an assessment of the competition, your sustainable competitive advantages, marketing, public relations, and advertising strategies, market research studies, and relevant future trends in your industry.
Financial information; This includes financial statements (best case/expected case/worst case), federal and state tax returns, company valuations or appraisals of key assets, current balance sheet, credit references, and a two-year income statement.
Schedules and exhibits; This should include certain key documents, such as agreements
with strategic vendors or customers,insurance policies, leases, and
employment agreements, to be attached as exhibits.
b) What may cause rejection of my loan proposal?
Your loan proposal may get rejected if it shows;
Unrealistically low business expense forecasts,
Lack of a properly completed loan proposal,
Inability to take constructive criticism,
Underestimated financial requirements Little or no experience in the business industry,
Overstated company revenue projections,
Attempts to pit one lender against another,
Lack of adequate debt collateral,
Poor communication skills,
Cash-flow projections that do not demonstrate an ability to repay the debt,
Cash-flow projections without adequate supporting documentation,
Lack of understanding of the loan proposal and approval process.
c) Do we offer debt financing?
One of our unique market niches is USA and International project debt financing, ranging from USD $1M minimum to USD $1B or more. We serve through our mission to be a catalyst to help our clients get timely funding.
d) What are our commercial loan terms?
Funding Amounts: Minimum loan amount is USD $1 million in the USA and USD $2M minimum for International project financing with no maximum loan amount.
Geographic Area: North America, South America, Caribbean, Western/Eastern Europe, Australia/New Zealand, Korea, Japan, Taiwan, Malaysia, Indonesia and other select USA-friendly locations worldwide
Funding Types: New development, acquisition and refinance.
Loan Terms: to be determined by property type, loan amount and findings during formal underwriting. Possible loan terms include: 5-10 year term loans amortized over 10, 20, 25 or 30 years; 15-30 year term loans amortized over 15, 20 or 30 years.
Interest Rates: rates are calculated from cost of funds against LIBOR, Prime or Treasury rates. This is determined based on property type, loan amount and findings during formal underwriting. Ranges are estimated between 6% - 8% with no pre-payment penalties after 24 months.
Loan to Value: Up to 80% depending on property type, loan amount and other factors; this also could include up to 70% of "completed value", which could mean up to 100% of costs.
Debt Service Coverage Ratio (NOI/debt service): minimum 1.25x, varies by property type.
Recourse/Non Recourse: can only be determined through formal underwriting.
e). What types of properties do we finance?
We offer financing for all types of commercial real estate including: hotel resorts and casinos; alternative energy (solar, wind, geothermal, hydro, biomass, waste conversion, etc.); office, mixed-use, assisted living, multifamily, retail, industrial, medical/ dental; public-use facilities; infrastructure (highway, rail, bridges, roads, etc.); recreational facilities, storage/warehouses, etc.
f). We also offer financing for large projects such as;
Alternative Energy: including Oil, Gas, Wind and Solar, Any newly formed proprietary patented technology that is tested and verified, and Water
Real Estate: acquisition and development; 5-units and higher; commercial
Services: senior living (assisted living with FULL medical infrastructure/support included), Hospital, Nursing Homes, Medical retreat facilities, R&D Labs, Water treatment, and reclamation /recycling
Products: which include medical, commercial invention (on a qualified basis), Textiles, Agricultural, Health Products, etc.
Business Financing: based on a review and qualification, certain project types not listed or related may be qualified for finance.
Note: project simply has to qualify for and clear underwriting and due diligence process. The minimum request amount we accept for large projects is USD $3M to USD $500M+.
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