All About Private Equity Loans

Private Equity fills the gap when conventional bank financing will not fit the scenario.?? This is a very popular program when banks tighten the purse strings like what is happening in today’s lending environment.

?

Timing??????? This is very often the reason borrowers go with Private Equity.?? You might have a situation where there is a businesses opportunity which requires quick access to money.??? This could involve getting a great deal on a property or a business deal in which a borrower needs to raise money quickly for an investment in a project.? Traditional financing takes anywhere from 60 to 90 days in this market and that may kill a deal.?? Private Equity usually closes in 2 to 3 weeks but can close as quickly as one week.?? Lower LTV’s and higher rates will get you closed faster.

?

Property???? This is the second reason borrowers choose Private Equity.??? Let’s say you have the opportunity to buy a building at a discount because it is vacant and needs a little work.?? A traditional bank will not lend against this kind of a property but it is a perfect match for Private Equity.?? The loan can provide for an interest reserve so that you do not have to worry about servicing the debt.?? Once the property is generating rent you can easily refinance the property into a conventional loan.

?

Term????????? Private Equity loans are interest only for a term of one or two years but can go out as far as three years or more.

?

Rates???????? Rates usually start at 6% and go up to 10%.?? The rate you will get is a function of risk.?? A cash flowing property at a 60% LTV will command a low rate while an empty building that needs work will get the higher pricing but everything is quoted on a case by case basis.

?

LTV??????????? Can go as high as 75% for purchase and up to 65% of the cost of rehab

?

Points???????? Depends on loan size but two is typical

?

Penalties??? There is usually some interest guaranteed so if you ask for a one year term the loan will provide that six moths of interest is guaranteed.? You should assume that half the interest will be required to be paid

?

Flexibility??? Whatever the scenario Private Equity may be able to fill the gap.? If there is sufficient collateral (not necessarily real estate – cars, art, jewelry can be considered) and there is a clear exit strategy (a way to pay back the Private Equity loan) we can usually get something done

?

Investors are constantly adding new programs with varying rates and terms.? Also, unlike major national banks, life companies, pension funds and hedge funds, private lenders usually prefer to operate only in their local area.

?

Send in your loan scenario and I will be happy to discuss borrowing options with you or your client.

?

Peter

(516) 581-5151

?

?

Peter Lupo Commercial Consultants

Commercial Real Estate Loans

Business Loans

Construction Loans

Mobile - (516) 581-5151

Web - plccnow.com