Setting The Record StraightThere is a metaphorical place in any business when the seeker of inside secrets reaches that signpost that says something like: “Beewair … Theyre bee Dragyns ahed.” Again, keep in mind I am being highly metaphorical, but I’ve been asked a number of times about a certain type of commercial real estate financing that makes me begin to suspect that someone is out there selling investment property “treasure maps” for $5.00 each! And you know just how much treasure you will find following such a map. So as a professional commercial real estate loan broker, I am here to set the record straight:NO LENDER offers a 100% Loan to Value commercial real estate loan.And I define “lender” to mean a source of capital that provides debt financing, secured by real property.So for all of you seeking that 20% Seller Carry and the 80% purchase money loan on a property you think is worth three times the purchase price … please, join us back here in reality. If pigs had wings, they would fly. So, if a lender was willing to allow you to purchase a property on those terms, why would they need you? They would make a whole lot more money doing the transaction themselves!Here is the reality concerning commercial real estate from a lender’s perspective: Commercial real estate is considered an investment, not a basic need, such as a roof over your head. Because investment real estate is “secondary” to a borrower’s personal residence, it is usually considered a higher risk loan.Why?If the fit hits the shan in a borrower’s personal life and money becomes tight, lender’s conventional wisdom says that the borrower will shift his resources to protect his personal residence ahead of his commercial investments. This may not seem immediately apparent when you look at the spread between home loan rates and Wall Street conduit rates (these commercial rates are actually lower than most residential ones). However, you need to check the terms to see the difference.You can still by a primary residence with no money down and good credit. You can not purchase a commercial property without some form of equity investment. In most cases, the commercial lender wants to see a minimum of 15% equity in the deal, although you can find some that will allow 10% provided the property meets minimum debt service requirements. But good luck finding that situation in most good markets. Oh, and very few commercial loans go full term like residential loans (yes, I know that there are exceptions). Most are balloons at 10 years.Yes, you can engage a mezzanine lender to fund almost all of the equity difference, but you are really going to pay for it either in points and rate or in some form of equity kicker … which takes us away from my definition of lender. And mezzanine lenders don’t make loans on the property itself … which is a whole other story.Thus, it bears repeating: There are no 100% LTV commercial loan programs! Commercial real estate is for serious investors with equity to risk, a positive net worth, and an asset that a lender would feel comfortable encumbering. So the next time someone approaches you with a map to a pot of commercial real estate loan “gold” … save your money for a latte at Starbucks!

90% financing in the commercial mortgage business is still very much an option. However borrowers looking to buy a facility to “house” their business will find many more options than investors.90% Commercial Loans For InvestorsIn general, straight 90% financing for investment properties simply does not exist. One year ago there were a couple of lenders that went that high, but their rates and fees were very restrictive. However, the way that borrower can structure 90% financing is have the seller hold paper. This maybe an obvious option for many but it should not be assumed that it is easy to get done.Probably 90% of banks out there will not allow any type of mortgage to sit behind their first. Why? because it creates additional risk for them 1. Seller seconds normally have a balloon which can force the borrower into foreclosure if they are not able to pay the seller off. And 2. The additional payments on the seller second will have an impact on cash flow and can send the property into uncomfortable levels for the bank.Despite these issues there are some banks that still will allow seller financing, bringing the combined loan to value to 90%. The conventional loan will rarely exceed 75% and the seller second would be at 15% loan to value. The buyer therefore would have to come up with only 10% for the equity injection.As mentioned above, one of the main constraints with structuring investment deals like this is that the deal still has to cashflow. Funding banks will look at both payments i.e. both the conventional loan and the seller financing to make sure that the property still hits the minimum Combined Debt Coverage Ratio’s which would normally be a little more conservative at a 1.25.90% Financing for Business OwnersBusiness owners have many option in buying properties with 90% financing. There are three main sources to accomplish this. The Commercial 30 Year Fixed, Five Year Fixed 7a Loan and the SBA 504 program. All three options have their own strengths and weaknesses. Rate on the 5 year fixed program are normally the lowest and there are normally NO fees to do this loan. The 30 year fixed loan’s obvious benefits is not having the worry about the rate moving.In additional all three options will allow a construction piece to be added into the loan. For example say you where buying a property but it needed $200,000 in renovation all three of these options would allow you to add this construction cost into the total loan amount.