Set Up Sheet
Answers to the following questions make up the inquiry that we will need:
Please make out your own format
Who: Borrower's name and address and contact information (we do not circumvent), address of subject property, rural or urban, the entity, his/her financial status, credit score, experience in similar projects, when purchased, how much owed, down payment, cash on hand.
What: Type of collateral, if real estate APN # (property tax parcel number) appraised value, net income from business (EBITDA) or net rent roll from most recent filed taxes, YTD net income, fair market value of assets.
When: The required time frame to close, why the rush? Any contingencies?
Where: Project location, amenities (i.e.: rail siding?)
Why: The reason for the loan (refinance, cash out, purchase, working capital, sale lease-back, invoice factoring) when purchased, at what price, how much owed on it, at what interest rate and remaining time on the note, use of funds: i.e. to improve the collateral or purchasing other investment or consolidation of present debts.
Debt Coverage Ratio: Amount of anticipated debt service divided into EBITDA above. How is the borrower going to pay for the loan if this amount is insufficient? Any other sources of income? How stable and predictable? Net available equity from other sources as additional collateral.
Cash: How much cash on hand, how much net verifiable monthly income, accounts receivable aging.
Exit Strategy: How the borrower is going to pay off the loan? Refinance? Sale? Construction? If construction, is there a firm loan commitment for take out loan? If it's to be sold, is there any pre-sold units with buyer's deposits?Are there any signed contracts from purchasers of final products? Do you have list of assets?
Simple guidelines:
Rule of thumb to service the loan: Take 1% of loan amount, it should be equal or less than Verifiable Monthly NET Income to service most of the loans. If it doesn't, then you must look for a verifiable, predictable, stable net income sources to make up the difference.
Rule of thumb to secure the loan: Is clear title available for equity to debt ratio of at least $2 for every $1 loan?
Some refinance cash outs will be considered at distressed value, which is about 30-40% lower than fair market value (equipment or real estate).
|