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Frequently Asked Questions
How is NAI Capital Financial Services different from my bank?
A: Our two main objectives are to create an environment that forces capital sources to
compete for your loan and to manage the transaction workflow so you can focus on executing your business plan.
Banks are constrained by the loan programs and underwriting guidelines
dictated by their institution and often these do not necessarily fit your needs.
The Bank's loan officers have the incentive to maximize profits while pushing
as much of the risk as possible onto the borrower, banks also demand that
the borrower put together and provide all documentation with no assistance.
Do I end up paying more by using NAI Capital Financial Services?
A: No. In fact, you will probably save money because NAI Capital Financial Services will
allow you to take advantage of the most competitive rates and terms available
from the various lenders that will be competing for your business, as opposed
to being limited to just one bank.
Who are NAI Capital Financial Services' typical lending partners?
A: The goal at NAI Capital Financial Services is to add value to customer transactions by
offering a wide range of financing alternatives and direct access to top
national, regional and local lenders. With our core values based upon
completing transactions, we have aligned ourselves with Alliances who
possess proven track-records and offer diverse, competitive and
well-researched financing options.
What requirements must be met to qualify for a commercial loan?
A: In light of recent finance industry issues, lenders have applied increasingly
more conservative standards for underwriting risk. Often, these
requirements are set by companies that buy loans in the secondary market.
Even if the lender doesn't plan to sell the loan immediately, the lender tries to
conform the loan to these standards so the ability to sell is always an option.
The lender will first look to the property to see if it can
support the loan. A
loan-to-value (LTV) ratio is calculated by dividing the amount of the
loan by an
assumed value, based on your net income and an assumed market cap rate,
and/or a recent appraised value. If your own money is tied up in the
property,
you are more likely to be making debt payments. In the event of a
foreclosure,
the property should be worth enough to repay the principal loan
amount. Generally, multi-family loans have a minimum 80% LTV, and
Office, Retail & Industrial loans have a minimum 75% LTV.
Finally, lenders examine the strength of a borrower's balance sheet and
operating experience. Traditionally, lenders will be looking for a net worth that
is roughly equivalent or greater than the value of the property. The borrower
should also have enough liquidity to cover six months of loan payments.
What are my alternatives for securing capital?
A: The following financial institutions are to be considered:
Life Insurance Companies: Large life insurance companies are usually
interested only in loans that exceed $3 million. They lack the ability to
service numerous small loans and therefore prefer a smaller number of large
loans. With billions of dollars in assets, some life insurance companies
can offer loans in the $50-$100 million range and even more. They offer
low rates and are conservative; they want the long-term yield with
low-risk loans provided by permanent mortgages on stabilized assets.
Government Sponsored Enterprise (GSE) Lenders: GSE or Agency
Lenders focus exclusively on stabilized multi-family properties and
properties limited to seniors. Rates are usually lower than other funding
sources and second mortgages are offered. They also tend to fund the
higher quality, stabilized assets.
Commercial Banks: Commercial Banks offer construction loans on all
property types. Such loans are usually offered only if the borrower has a
take-out commitment from a permanent lender; upon project completion,
the permanent loan will "take" the bank "out of" (repay) the construction
loan. Commercial banks typically offer only recourse loans where the
borrower is compelled to provide additional collateral against the loan in
case a foreclosure becomes necessary.
Conduit Lenders: This is a relatively new type of lender that is attempting
to address every asset type and class. By definition, Conduits are
organized to pool your loan with similar assets and sell them to outside
investors. As a result, underwriting standards are set by these buyers
and can often be limiting, especially for unique properties or borrowers
that need more cash flow management freedom. The loan application
process can also be intimidating because every loan needs to be
extensively documented for an easy sale. The upside of these loans
include the mitigated risk in secondary market hedging, and often the
rates are more competitive than traditional lenders. Conduit loans are
typically non-recourse.
How long will it take to complete the application process, to get a reply and to receive funding?
A: Most loans typically fund within 45 to 60 days. NAI Capital Financial Services will act
on behalf of the borrower to professionally package and present the loan
request. Once a lender is chosen, we help negotiate the application, guide
the borrower through the due diligence process and ultimately coordinate the
loan closing.
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