818 Rt. 202-206
North • Bridgewater, N.J. 08807
Telephone (908) 722-9217 • Fax (908) 722-2827
Toll Free 800-327-0123 • Email:
info@goldmortgage.com
Small Business lending is actually a very simple business. Golden Mortgage offers a broader range of financing programs than most other SBA lenders for qualified small business borrowers.
- Loan amounts from $150,000 to $4,000,000.
- Terms from 10 years to 25 years depending on the use of the loan proceeds.
- Purpose - Real Estate (owner occupied at least 51%), business acquisitions, partner buyouts, start up financing, franchises, ground up construction (owner occupied at least 67%).
- Rates from Prime plus 1.5% to 2.5% depending on loan amount, term and strength of the borrower. Most rates are adjustable quarterly, however, larger Real Estate loans may be at various combinations for fixed rates.
- All at much lower collateral requirements than conventional lending !!!
I believe you will find yourself working with the following 4 types of financing transactions that we may entertain. A consistent advantage of all our financing is a lower collateral requirement than conventional financing. These financing programs should be a very highly marketable because small businesses should see strong value in keeping their operating funds in the business. This will inevitably make the business more profitable. A structure of this type will keep most competition away. Frankly, many times this type of financing is the only alternative for a business that has a multitude of competing cash operating requirements.
1. Purchase primarily owner occupied real estate or refinancing of existing debt-- existing business -- Most of the time I believe it reasonable to expect that this type of business will have the historic ability to service the proposed debt. Therefore, we can probably expect to provide 10% down financing for purchases and somehow divide up the closing costs. Refinancings generally do not require any cash injection. Interest rates will range from prime plus 1.75% to prime plus 2.25% adjustable quarterly and I can actually do better with better credits and larger deals. Rates may, at times, be fixed for large real estate loans. The term of these loans will range from 20 to 25 years.
2. Purchase primarily owner occupied real estate -- start-up business or major expansion The only difference here versus the above situation is that the business does not have the historic ability to service the debt. Therefore, a larger down payment may be required. In the case of a start-up business, a down payment to the TOTAL PROJECT COST will be 30% [unless the business is a medical practice – 10% down or certain franchise concepts – 15% down]. The total project cost will also include renovations, equipment, furniture, inventory, working capital and closing costs. Said another way, it would likely be structured as 10% down to the real estate and the borrower pays for all other costs that again is a very generous product offering. For expansion loans for existing businesses, the cash injection may the less than 30%.
3. Business Acquisitions -- There are basically three requirements associated with business acquisitions --
· Cash Flow -- The business being acquired needs to demonstrate the ability to service the proposed debt at a coverage ratio of 1.32 times for each of the last two years from the business tax returns provided. (Restaurants are required to show 1.4 times – Doctors only need 1.1 times).
· Injection -- If the goodwill is less than 50% of the total project cost, the injection would be 15%. If the goodwill is more than 50% of the total project cost, the injection would be 20%. Doctors many times can be financed 100%.
· Management Experience -- We should do our best to find related experience for, hopefully, three years.
· Collateral -- No issues if the loan request is less than $1 million, except as noted below. Above $1 million, we should discuss these situations.
4. Partner Buyouts – These basics are very similar to Business Acquisitions except to note that if the business owner has reasonable investment in his business there would be less or no required new cash injection.
Business acquisitions and partner buyouts will carry terms of 10 years and a rate of 2.50% to 2.25% adjustable quarterly. At times, I may be able to do better on the rate. If real estate is involved in the acquisition the term could be 20 years or more depending upon the amount attributed to the real estate as part of the total purchase price.
Probably the only other major item to watch for is other owned real estate as the 7a SBA product has a requirement -- in order to secure the partial guarantee if there is available equity after discounting, then the lender is required to secure the property up to 100% discounted loan to value.
Of course there are other ancillary requirements that would be too lengthy to put in this memo. And credit requirements may change with CIT or the SBA from time to time. But the above referenced information should act as an excellent guide to initially review a transaction.
Processing -- Call me anytime so we can discuss a transaction. Then I can either come to meet with you or you could forward the tax returns for the past three years for both the business and a buyer. I would also need to know the proposed project cost and any information regarding collateral value. With this little bit of information, I can actually be about 90% accurate in my analysis. The next step would be for me to issue a proposal and for the borrower to begin completing the application forms.
If you have questions, you can contact, Ted Ark, directly at 800-327-0123 extension 11 or email: tark@goldmortgage.com
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