stuck for a solution. - Posted by Rich

Posted by Rich on May 15, 1999 at 16:18:43:

I was out this afternoon and I ran into my town’s economic developer. He told me about a program within the city that works similar to the SBA. They have guaranteed funds through a block grant for business development. They work with the local SBA office and they have a guy who will write up your proposal for you. He said they charge 5% interest, and, at the most, 5% downpayment, which can be included in the money received from the city. It sounds like it could be my salvation. I might need more time to get everything drawn up, so I’ll see if I can get an extension on the contract. I’ll keep you posted.
Thanks a bunch for your input.

  • Rich

stuck for a solution. - Posted by Rich

Posted by Rich on May 14, 1999 at 01:05:44:

I put an offer on a mixed use (commercial/apartment) property that was listed for 90k. It had been on the market for 3 years - it started out at $175k. My offer was 65k. The owners accepted. I’m waiting for the appraisal to come in…I think it will be around $125k - $150k. My problem: Being self imployed, I need a no doc loan and a mortgage company that will do the loan wants 20% down, regardless of the purchase price. If the property appraises for $125k, even at 50% LTV, you would think I would be able to borrow $62,500. This appraisal is going to cost me over $1,000. and I’ve already put up $1,000 as earnest money, and if I don’t come up with the 20%, I have a good chance of losing this deal. My contract expires May 31. I have about $60,000 in equity in 2 other properties, but as slow as this appraisal has gone, I don’t think I could get another appraisal done before the expiration. My offer included purchasing the contents of the property which could bring around $15,000 at auction. If there’s a way to borrow against the contents, that could be another option, and repay the loan after the auction. Does anyone have any ideas? Thanks. - Rich

Re: stuck for a solution. - Posted by V.P.

Posted by V.P. on May 14, 1999 at 10:59:47:

Will the owner let you renogiate the expiration date and maybe pick up another 30-45 days? Possibly a little more earnest money if required to do so might save the deal.Sounds like you need a NEW source of funds. With a deal like that and your other assets it should be a go,you just need a little more time.

Re: stuck for a solution. - Posted by John(NH)

Posted by John(NH) on May 14, 1999 at 10:34:16:

How about a hard-money lender at 60% LTV? With that much equity, the charges would be worth it. Then refinance in 12 months.

Re: stuck for a solution. - Posted by Dave T

Posted by Dave T on May 14, 1999 at 10:18:41:

Does the mortgage company really need you to have 20% of your own money in this deal, or are they just saying that they will only finance 80% of the purchase price?

If the latter, will the seller carry back a second for the difference? If not, can you get a home equity loan or a cash advance on credit cards? Have you approached family members for a private loan? Is this property located in an urban development target area where block development grant money may be available? How much can you borrow against the title in your car/truck?

Re: stuck for a solution. - Posted by Ed Garcia

Posted by Ed Garcia on May 14, 1999 at 01:14:38:


You don’t say where your at?

Also, need more information the the property.

More discriptive ?
How much are the rents etc?

Ed Garcia

Re: stuck for a solution. - Posted by Rich

Posted by Rich on May 14, 1999 at 07:49:05:

The building is in Maryland. It’s 4 stories 18,000 sq. ft. I have an individual interested in leasing the basement for storage. I was going to put my business on the 1st or street level. I am planning on making 2 large loft apartments on the 2nd and 3rd floors, some time in the future. The contract I have includes all of the contents which includes a lot of store displays, shelving, nice pegboard wall units, and some oak desks and assorted odds and ends. It has a lot of potential and would allow me to consolidate my business and storage. My current storage building is about 5 miles from where I live, whereas the new building is within walking distance and has a lot more room. Plus, it would allow me to expand my business. Feel free to ask any more questions. Thanks. - Rich

Re: stuck for a solution. - Posted by leapfrog

Posted by leapfrog on May 14, 1999 at 08:29:46:

Would it not be possible to have an auction place buy out the contents (probably for a lower price-but as a lot) and get the money in time? The other option is to go find another mortgage broker. There is currently no rental income on this property that can be used as revenue toward the mortgage calculation?

Re: stuck for a solution. - Posted by Rich

Posted by Rich on May 14, 1999 at 09:47:18:

I just talked to the mortgage company and the property came in at $110k as is. So, I think there is room for a deal here somewhere where I don’t have to come up with 20% down.

Re: stuck for a solution. - Posted by JohnBoy

Posted by JohnBoy on May 14, 1999 at 22:20:49:

Since your planning on housing your business at this property you can apply for an SBA Loan. They have a LowDoc Program that allows you to borrow up to $150k. They use a one page application that you fill out on one side and the lender fills out the other side. SBA will give you an answer within 36 hours!

SBA insures 80% up to the first $100k and 75% on anything over $100k. The bank will have the property AND an 80% guarantee from SBA on your loan! If you have decent credit, this should be a slam dunk for you!

What you need to do is sit down and draw up a business plan on your business showing what the money will be used for, two years of sales projections, etc.

Once you have the business plan together go to a bank that does SBA Loans. Go straight to the commercial loan department and talk to them as if you want them to write the loan. If that doesn’t work out then tell them to submit it to SBA.

SBA will allow small business loans to purchase a business, expand an existing business, borrow working capital, purchase equipment, AND they will allow you to borrow to purchase a commercial property as long as your business will be occupying the building to run your business!

I just did one of these and I wasn’t buying any real estate. Mine is in a shopping center under a commercial lease. They are using the equipment and lease hold improvements as the collateral.

I borrowed the full $150k they allowed under this program. $85k towards equipment, $41k for working capital, and $24k for lease hold improvements! :slight_smile:

SBA came back and said they wanted to see me come up with $10k - $15k of my own money torwards this ON TOP OF THE $150k they loaned! I had the bank lend $12k as an equity loan against my house for the down payment and after we closed on the loan I paid off the equity loan.

Put your business plan together focussing on the business you have instead of the actual property as your primary reason. Show them how this will allow you to expand and grow your business by relocating to this building. If the credit is good and the plan shows the bank how this makes good business sense by you buying this property to expand your business then it should be a slam dunk!

Don’t go into the bank and “ask” them if they think they would be willing to give you a business loan. Rather, walk in there like your confident that by getting this loan it only makes good business sense and there’s no reason why the bank should give it a second thought about not approving this! In other words, “EXPECT IT!”

It’s all in how you present yourself to the bank. Do this right and they will bend over backwards to get the loan approved for you!


Re: stuck for a solution. - Posted by Rich

Posted by Rich on May 15, 1999 at 07:18:48:

Thanks for the advice. I’m going to work on a business plan this weekend. Do you know of any good sources (web sites)of reference for writing a comprehensive plan? How long does the whole process usually take, so I’ll know about how long of an extension to ask for.
Thanks everyone for their ideas. When I start thinking that I’m in over my head, I turn to this site. It always gets me rejuvenated.

  • Rich

Re: stuck for a solution. - Posted by JohnBoy

Posted by JohnBoy on May 15, 1999 at 11:05:00:

I don’t know of any sites off hand but you can find books on this at a book store. What you will need is a:

Summary: A summary sheet and business overwiew.


Project Costs: Breakdown on what the money will be used for. (real estate, improvements, equipment, supplies, advertising, working capital, etc.) SBA allows up to $150k with this program so allow for some extra to pay for a grand opening, working capital to carry your costs for a few months, any furnishings you may need, etc.

Income/Expense Projections: 2 years of projected income and expenses broken down by month.

Exhibits: demographics of the location, organizational documents, your resume, and any other information about the operation or the area.

You might be able to get the demographics off the web site. Do a search on your city and see if they have a web site or if the chamber of commerce has a web site. They usually list the demographics of their towns.

I walked into the bank on a Friday, they faxed the one page app. over that afternoon and SBA approved it by the following Wed. morning. We closed the loan by Monday. So it took a week to close the loan from the time I walked into the bank. But yours may take a little longer since yours includes the purchase of the real estate. They will need an appraisal (which hopefully they will except the one you just had done), title work and they may want an invironmental study done since it’s a commercial property. (don’t ask them about this, wait and see if they bring it up first. No sense in giving them any ideas if they don’t bring up.)

The first thing I would do is go down to a book store and find some books on writing a business plan. This will give you a guide on how to lay one out. Get that put together over the weekend and get it to the bank on Monday morning. When you sit down with the banker tell him you NEED this approved by yesterday! It’s only a one page application they need filled out to fax over to SBA. They should have an answer for you by Wed. If you go to a bank that is a preferred lender of SBA that bank can approve the loan on their own and send the paper work to SBA later. The bank I used wasn’t a preferred lender so they had to wait for SBA to approve it first. You can go to SBA’s web site and read up on this loan program and get a list of their preferred lenders for your area. Click on loan programs and then click on SBALowDoc. This is the program you want to apply for. It explans everything about the program and what you need. Then search their site for a list of preferred lenders in your area. You should be all set!

Here’s SBA’s web site:

Good Luck and keep us posted on how it turns out.