Beretta Only

Sunday, October 14, 2018

How Lines of Credit Work with Arizona Commercial Loans

Commercial lines of credit are very popular with the small business financing of today—and are the most misunderstood. Here, then, are some of the basic facts that can help you decide if this type of Arizona Commercial Loan is right for your small business.
A line of credit allows a company to draw on a predetermined amount of money. To access the funds, the company just needs to draw on the line. Every time you draw on the line, you are reducing the amount of funds you can draw from. The inverse is that you can pay down the line of credit at any time, thus increasing the available funds to draw from. A conventional credit card works much like a revolving line of credit.
When getting the Arizona line of credit, the bank restricts the use of the funds. Since it is a Arizona commercial loan, the funds can only be used for business purposes. Your company can use these funds to cover short term needs such as paying suppliers, covering payroll, and other corporate expenses.
Just like all types of lines of credit, there is an associated cost. The costs vary depending on the size and risk of the line, and the fees are based on the outstanding balance. There are additional fees such as availability and maintenance fees. These fees vary by bank. Most banks require that the full balance of the line of credit be paid down in full once a year.
Lines of Credit: Secured and Unsecured
Secured Lines
Both corporate and personal collateral can be used for this type of line of credit. These assets will be used to secure the repayment of the line of credit. If the business owner defaults, the bank will foreclose on the assets to pay off the loan. Various types of assets can be used such as account receivables, inventory, cash, machinery, securities, certificates of deposits and real estate. The pleaded assets will be secured by the bank filing a UCC.
Unsecured Lines
This type of line of credit does not required collateral such as outlined above. The unsecured line of credit will be personally guaranteed by the business and often includes a personal guarantee by the business owner. In the case of a default, the bank will sue the business owner personally as well as the company.
When applying for a Arizona commercial loan, the bank will examine the company’s income statement (P & L and Balance Sheets). These reports will help the bank determine if you can repay the loan.
Most banks will want to review two years of financial reports. The bank wants to see two years of operating profits. The bank also wants to see assets on the balance sheet such as accounts receivable, machinery, inventory and real estate. This requirement varies by bank. The line of credit based on these assets runs around 50% of the net value of the asset such as the machinery after depreciation.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Owner Occupied Hard Money Lenders

You may be surprised to find out that owner-occupied hard money lenders offer loans for primary residences. Find out the specific situations where you can benefit from these types of loans.
Are you in a circumstance where you are being denied a residential mortgage? There are many circumstances when a borrower is denied this type of mortgage from both credit unions and banks. When the person seeking a loan has little or no alternatives, they will often turn to a residential hard money lender to obtain a mortgage on the borrower’s primary residence. Some of the reasons a borrower may turn to this type of lender are:
The borrower has bad or poor credit
If the borrower has had a recent loan modification, foreclosure, short sale or bankruptcy
If the borrower has two years or less of current employment
If the borrower is self-employed
A bridge loan is needed by the borrower for a primary residence
In some instances, a borrower goes through the approval process with a conventional residential mortgage lender, and the lender is not able to perform while in escrow. The borrower then searches for a private owner-occupied hard money lender to secure financing through. The lender is able to provide fast approval and funding which will help prevent the borrower from losing the property they have a contract on. Once the escrow closes, the property is secured, and the borrower can refinance with a conventional mortgage company.
Why Arizona Owner-Occupied Hard Money Lenders are Few and Far Between
Most owner-occupied hard money lenders will not consider lending for your primary residences because:
Additional documentation is required
The lender is required to obtain additional licensing
Regulators will exert firmer regulations
The time to fund the loan increases since there are mandatory recession periods
Investment loans have far greater lender risks than owner occupied mortgages
Arizona Owner-occupied hard money lenders are subject to Federal regulations. Some of these regulations consider Dodd-Frank. The Dodd-Frank act requires the lender to verify the borrower’s income and expenses. Paystubs, tax returns and W2’s are ways the borrower can verify their income. Debt to income (DTI) must be kept under certain levels by the borrowers. Car payments, other mortgages, credit card payments and other debts will be considered. Also included in this ratio will be the new mortgage obligations, (taxes, mortgage payment and insurance).
The owner-occupied Arizona hard money loans are intended for short term use, generally three to five years. Most lenders will require the borrower to have a plan in place to obtain long term financing.
A hard money loan can offer borrowers with credit issues time to repair their credit report—and not lose their chosen property. Others may be postponing obtaining a conventional loan until the mandatory waiting period for negative credit events has passed. These events may include short sale, bankruptcy, loan modification or foreclosure. If the borrower’s property has enough equity and there currently is a first (1st) mortgage and the borrower does not qualify for a conventional second (2nd) mortgage, then the borrower can consider a hard money lender. This may be a prudent decision if the proceeds of the second mortgage is used to pay off high interest rate credit cards or pay down other high interest debt.

Saturday, October 13, 2018

A Borrower’s Guide to Arizona Business Loans

There are several different types of loans suitable for businesses. Make sure you know the difference between each one before choosing your next Arizona business loans.
If you are running a business, you may find yourself in need of working capital, new equipment, or additional inventory. A business loan specifically for one of these needs may be your best bet when it comes to continued success or hanging in there during the slow season. There are an assortment of Arizona business loans to choose from including bank loans, mezzanine financing, asset-based financing, invoice financing, microloans, business cash advances and cash flow loans.
Bank loan: Just as the name indicates, the originator of this type of loan is a bank. The loan may or may not be a secured loan. A secured loan requires approved collateral. If payments are not made, then the collateral will be kept and usually sold. An unsecured loan is, just as the name states, one in which there is no requirement to pledge collateral to obtain the loan. Before making an unsecured loan, a bank may want to see the borrower’s business accounts, balance sheet and business plan, the principal’s background, and credit histories.
SBA Loans: The Small Business Administration is a government agency that offers guaranteed backed loans through your local bank. The SBA (a) includes both a standard and express loan approval process.
Mezzanine finance: Mezzanine financing effectively secures a company’s debt on its equity, allowing the lender to claim part-ownership if the loan is not paid back in full and on time. The loan is made with collateral. Dilution of the debtor’s equity occurs in a default situation.
Asset-Based Finance: If you are lacking the credit rating or track record to qualify, this type of financing has become a very popular choice. The lender focuses on the borrower’s assets instead of their credit rating. Various assets are considered including the premises, plant, stock, or receivables.
Invoice Finance (factoring): An alternative to conventional financing, this type of lending requires the borrowing at a discounted amount of the invoices. Once established, you will be able to obtain funds as soon as a new invoice is created. This may not be the best option for your business. There may be a negative view by customers, and the lender will take ownership over the businesses’ invoices until the loan is paid.
Microloans: These Arizona business loans are for amounts of $100,000 or less. Alternative lenders are more likely to make these types of loans than traditional banks. If the traditional bank makes this type of loan, it is made based on the individual personal credit score than the business credit score.
Checking out Online Lenders
A number of online lenders have begun popping up on the World-Wide-Web. Since 2014, $12 billion dollars have been made. Since 2000, non-bank online lenders have doubled their outstanding portfolio balance each year. Another option is crowdfunding—an option that allows businesses to raise capital from a wide variety of sources.
Personal guarantees are usually required if you own a certain percentage of the business.

If you are an owner of 20% or more of a business, most lenders will require a personal guarantee. This allows the lender to collect on a Arizona business loan in the event of a default. In most cases, as a personal guarantor, you will need a strong personal credit score.

Friday, October 12, 2018

Things to Consider When Obtaining Hard Money Loans

Are you wondering what Arizona hard money loans are and where they fit into your investment strategy? Here are the basics of these types of loans and what they can do for you as an investor.
This type of loan is an asset-based loan. The borrower wishes to secure a loan backed by real property. Private investors and companies are typical issuers of these loans. Unlike banks, Arizona hard money loans can carry higher interest rates. These interest rates are higher than a convention real estate loan because of the higher risk and the duration of the loan which is shorter than conventional real estate loans.
People using Arizona hard money loans are usually looking for funding for projects lasting from a few months to a few years. The criteria for lending and borrower costs are similar to bridge loans. In fact, many hard money lenders specialize in bridge loans. Bridge loans are used for properties that are in transition and may not be able to qualify for traditional financing. An example of a bridge loan is when a home buyer finds a new home they’d like to buy before their old home, which is on the market, sells.
Many hard money lenders will lend 65% to 75% of the current property value. The amount of the loan is determined by the loan to value or LTV. It is figured by the ratio of the loan amount divided by the value of the property. Arizona hard money loans are mainly used for commercial property. These types of loans first started in the 1950s and have been growing in popularity.
Although mostly unregulated by state and federal laws, some restrictions on interest rates by states, commonly known as usury laws, prohibit hard money loans. Two of these states are Tennessee and Arkansas.
Federal Guidelines
Since the 2009 mortgage crisis and the passing of the Dodd-Frank Act, these loan programs have greatly expanded. This is in part due to the strict regulations that were put on banks and lenders after the passing of this act. Truth in Lending and Dodd-Frank set out Federal guidelines for lenders, mortgage originators, and mortgage brokers requiring them to evaluate the borrower’s ability to repay the loan. The ability to repay the loan is on the borrower’s primary residences. If the lender does not conduct the proper due diligence, they are faced with high fines for non-compliance. Hard money lenders mostly lend on commercial loans or business purposes so that they can avoid non-compliance with TILA, HOEPA and Dodd-Frank guidelines.
Before any offer of financing, the lender will want to determine the LTV (loan to value). The basis for the loan is the liquidation value of the collateral.

A BPO (Broker Price Opinion) or an independent appraisal by a licensed appraiser in the state that the property is located in, will value the property. Typical hard money loan interest rates range from 10% to 18%. Despite these rates, investors often turn to them due to quick loan approvals, high flexibility, less documentation than conventional lenders, and offering the ability to put a bid on a property that may go quickly after hitting the market.

What You Need to Know If You Are New to Investment Property Financing

If you think that obtaining investment property financing will be as easy as getting your home mortgage, think again. Prepare for funding your first investment property with these tips.
The default rates for borrowers on investment property loans is higher than home mortgages. Because of this, lenders require higher down payments and rely on strict underwriting for Arizona Investment property financing. This means that, if you’re purchasing an investment property, be prepared to put down at least 20 percent of the purchase price. There are, however, exceptions and percentage rates are often based on the type of property. For instance, anywhere from 25 to 40 percent may be required for multi-unit properties.
The advantage of a commercial loan is that the borrower is not required to carry mortgage insurance. Conventional loan programs allow 80% LTV and, for investment properties, this is a best-case scenario. You will also want to explore crowdfunding websites for real estate. While these tend to be more expensive, they are often more flexible than conventional loans. Before entering into an investment property, you should have at least three months payments as reserves.
Both interest rates and upfront lender fees are higher than conventional mortgage lenders. Lenders advertise that their rates will be 0.25% to 0.5% higher than their homeowner loans. You should expect 1 to 3% points higher than owner occupied loan rates. If the lender charges 4% interest for their homeowner loans, you can guestimate an interest rate of 5%-7% for investor loans.
In addition to the interest rates, you will be charged up front points for a mortgage loan. One-point equals one percent of the total amount of the loan. You can see how these fees add up quickly. Make sure you have reviewed your credit report and credit score. If your credit score is below 740, you will have higher interest rates, higher lender fees, and lower LTVs for your investment property. If you have a mid-level score, then a conventional loan may not be an option. However, the collectable (property) is reviewed more than you as a borrower. As we mentioned earlier, homeowners are far less likely to default than investors. Lenders have built in loan programs with lower LTVs as caution to default.
The Effects of Multiple Mortgages on Investment Property Financing
If you are carrying multiple mortgages on your credit report, your options are dwindling. Once you hit the threshold of four mortgages on your credit report, you may be untouchable by conventional lenders. Fannie May has established a program to help investors that allows 5 to 10 mortgages. Fannie May’s program requires 6 months payments in liquid reserves at the time of settlement. The program requires 30% down for 2 to 4 units and 25% down for single family homes. You are persona non-grata if there are any foreclosures or bankruptcies or late mortgage payments. You will need a credit score no less than 720+ if you have 6 or more mortgages.
If you have 10 or more properties, you have slim options. A good starting place is community banks. Blanket loans issued by commercial lenders are secured against multiple properties. Be sure to ask what happens if you want to sell a property in the package.
Hard money lenders are an option that many investors turn to.

Level 4 Funding solves Arizona investment property financing issues while offering the lowest possible rate term. Real estate investing has made millions of individuals millionaires. Don’t hesitate because you are unsure of your investment worthiness. Call us today for a no-obligation quote.

Beretta Only

Sunday, October 14, 2018

How Lines of Credit Work with Arizona Commercial Loans

Commercial lines of credit are very popular with the small business financing of today—and are the most misunderstood. Here, then, are some of the basic facts that can help you decide if this type of Arizona Commercial Loan is right for your small business.

Lines of Credit: Secured and Unsecured

Owner Occupied Hard Money Lenders

You may be surprised to find out that owner-occupied hard money lenders offer loans for primary residences. Find out the specific situations where you can benefit from these types of loans.

Why Arizona Owner-Occupied Hard Money Lenders are Few and Far Between

Saturday, October 13, 2018

A Borrower’s Guide to Arizona Business Loans

There are several different types of loans suitable for businesses. Make sure you know the difference between each one before choosing your next Arizona business loans.

Friday, October 12, 2018

Things to Consider When Obtaining Hard Money Loans

Are you wondering what Arizona hard money loans are and where they fit into your investment strategy? Here are the basics of these types of loans and what they can do for you as an investor.

Federal Guidelines

Before any offer of financing, the lender will want to determine the LTV (loan to value). The basis for the loan is the liquidation value of the collateral.

What You Need to Know If You Are New to Investment Property Financing

If you think that obtaining investment property financing will be as easy as getting your home mortgage, think again. Prepare for funding your first investment property with these tips.

The Effects of Multiple Mortgages on Investment Property Financing

Hard money lenders are an option that many investors turn to.

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