Tag Archive : interest

Less Than Interest-Only Payments Big And Commercial Bridge Loans

Last week I wrote a blog about how historically aggressive private money commercial bridge lenders are getting.  This month George Smith Partners, the big commercial mortgage banking company (the original founder started George Smith & Company decades before I founded Blackburne & Sons forty years ago) released a newsletter, FinFacts, containing the following tombstone:

“George Smith Partners (“GS P”) placed a $10,900,000 non-recourse loan for the refinance of an underperforming stabilized 50-unit multifamily community in Los Angeles.  The Sponsor recently acquired the asset at approximately 50% below market from an affiliate party, and GSP was able to facilitate approximately $3,000,000in cash out proceeds at closing.”

“A portion of the loan proceeds will be used to renovate units as they become vacant in order to achieve current market rents.  GSP identified a non-institutional lender (private money lender) who was comfortable with the cash out proceeds and who understood the history and dynamics of this non-arms-length acquisition.  The non-recourse loan is fixed for 1.5 years with a 7.99% interest rate and 4.99% pay rate.”


Interest Rate:  7.99% with 4.99% pay rate
Term:  18 months
LTV:  70%
Recourse:  Carve-Outs Only
Fees:  1.0%
Prepayment:  None; no exit fee

The reason I brought this closing to your attention is because the Big Girls (the originator of this commercial loan at GSP was a lady) are arranging large commercial bridge loans with less than interest-only payments.

Article Provided By By George Blackburne

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Are Low Interest Rates, The New – Normal?: 4 Questions

We are currently, witnessing, a period, of time, with the longest, extended period, of historically, low, interest rates, in recent memory! While, there are many reasons, for this, it may be, beneficial, to better understand, the fundamentals, and relationships/ ramifications/ impacts, of this sort of prolonged, extended period. However, it’s also important, to recognize, since, we have never witnessed this, before, our concepts are based on theories, concepts, and apparent, common sense. Will interest rates, remain, this low, and become, the New – Normal, or, will, we, once again, see cycles, over – time? With that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, 4 questions, and whether, it will, in the longer – run, create undesirable ramifications.

1. Historic lows – How low, will rates go?: In the last year, or two, many have believed, we experienced, the lowest rates, only, to discover, they went, even – lower! Although, these are historic lows, how low, will they go? We observe mortgage interest rates, which have never been lower, in recent memory, and the impacts. In housing, it means, a buyer, can purchase, more house, for – his – bucks, because, it creates low monthly payments, etc. It also means, individuals, can qualify for bigger loans, because, their monthly expenditures, are a lower percentage of one’s overall income, etc. When, banks pay, such low – interest, and bonds, such, low dividends, it contributes, strongly, to the rising stock market, for a number of reasons, including, it being, the only game, in – town! However, banks and lenders, also, reap large profits, because, they still charge high rates, on credit cards, and, other, unsecured – consumer loans! It helps car dealers, because, especially, lease rates, but, also car loans, becomes more attractive!

2. Historically, rates fluctuate?: Will they do so, this time?: A review of historic trends, indicates, rates fluctuate, over – time. Since, they seem to have usually done – so, will this occur again, and, if – so, when? Since, the United States budget deficit is also, at a record – high, will that prolong, or reduce, this current period?

3. Relationship between rates and stocks: Because, when rates are low, using bank vehicles, or bonds, bills, etc, become less attractive, largely, because, they may not, even, keep – up, with the inflation rate, especially, in the long – term! Therefore, the stock market, usually benefits, because, many borrow cheap – money, and invest it, in stocks, and, it also, becomes, the only game, in – town!

4. If this continues, what will Federal Reserve use, as new/ future incentives. stimulus: Historically, the Federal Reserve, used lower rates, to stimulate investing, and/ or, spending. If this becomes the New – Normal, what will be the weapons, available, etc?

Will this become the New – Normal, or, just, a temporary, cyclical occurrence? The smartest strategy is to understand impacts, and be prepared!

Richard has owned businesses, been a COO, CEO, Director of Development, consultant, professionally run events, consulted to thousands, assisted with financial planning, and conducted personal development seminars, for 4 decades. Rich has written three books and thousands of articles. Website: http://plan2lead.net and LIKE the Facebook page for planning: http://facebook.com/Plan2lead

Article Source: https://EzineArticles.com/expert/Richard_Brody/492539

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Nobody Likes Paying Interest

We understand that completely; nobody likes paying interest, neither do we. It’s an emotional hot button for any business person when financing equipment or acquiring working capital. They feel it’s like money thrown away into thin air… or is it? Interest is the price you pay when using someone else’s money to finance something. So why not pay cash and eliminate interest? When business folks say that to me I respond with, “if you have unlimited cash or if you have enough resources that paying cash won’t jeopardize your business cash flow then go right ahead”. I never argue that point because it’s an emotional one. But the warning should be clear; paying cash for something which cripples your ability to have capital for emergencies, market changes, market opportunities or expansion is not wise. If your market changes and sales slowdown, going to your bank and borrowing capital may prove difficult; it’s not going to be easy because traditional lenders are not risk takers and lending to a downward trending business is “risky”.

Financing assets along with paying interest allows you to preserve your capital and the longevity of your business. Of course the finance payment has to make sense; it has to fit within your monthly budget and the asset should contribute in one way or another to your bottom profit line. It should make you money or save you money. The third contribution is harder to measure which can be image and goodwill; if you’re a custom interior kitchen retailer then investing in a modern showroom for your clients to see your products can be invaluable and give you a high return on your investment but again that’s a little harder to put an exact number on. In any case, the finance investment still has to be manageable within your budget.

Though nobody likes paying interest, it has to be looked upon as simply part of your return-on-investment calculation to assure you are making the best use of your new equipment addition. How to get the lowest rate? Maintain your personal FICO as high as possible and get it repaired by a service if you get into trouble, review your D&B business profile and make sure it’s accurate, if any tax liens exist then establish a payment plan and have it documented and in place which shows you’ve taken the right steps to resolve them and finally have your financial statements prepared by a service, bookkeeper or accountant which will indicate you are organized and manage your business seriously. In the long run if managed properly, the finance interest you pay will actually pay you back.

AnalytIQ Group helps small to mid-size companies lease or finance technology related equipment and special projects nationwide. Get More Infomation: Here!

Article Source: https://EzineArticles.com/expert/Lester_Salvatierra/917913

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Commercial Loans and Why Interest Rates Are Falling Like a Rock

The ten largest economies include (1) the United States; (2) China; (3) Japan; (4) Germany; (5) United Kingdom; (6) India; (7) France; (8) Italy; (9) Brazil; and (10) Canada.  I was personally surprised to see that the economies of both Brazil and Canada made the top ten.

Most of these economies are shrinking in population, and this is extremely deflationary.

Why is a shrinking population deflationary?  In order for the money supply of a modern economy to grow, its banks need to make new loans.  In order to make new loans, banks need borrowers.  If the number of potential borrowers is shrinking, eventually the country’s money supply – and hence inflation – will shrink.

Why is deflation so bad?  A little bit of deflation is not terrible.  It makes the dollars of working Americans go further.  For example, if the price of a new bike for your kid falls from $70 to $62 over two years, that is surely not a bad thing.

But there is a dark side to deflation.  For one thing, deflation makes it harder to make the loan payments on your existing debt.  For example, if your mortgage payments are fixed at $2,000 per month, and the prevailing wage rate is falling at 2% per year, you could be in for a world of hurt if you have to change jobs and accept a new one at the lower wage rate.

The second problem is that deflation slows an economy because people postpone their purchases.  For example, why buy a new car for $50,000 this year when the price will probably fall to $46,000 next year?  Why not just postpone your purchase until next year?  If enough Americans delay their purchases of a new car, the automotive industry will soon tank and tens of thousands of workers will be laid off.

Lastly, significant deflation usually comes with a contracting economy, layoffs, falling demand, and job insecurity.  Deflation can easily become self-feeding.

This is so important that I am going to say it again.  Deflation can easily become self-feeding.  A modern economy can quickly cycle down the drain.

So the cycle goes as follows:

People stop having children.  The number of potential borrowers shrinks.  As the number of potential borrowers shrinks, banks make fewer loans.  The money supply then contracts, and a wave of deflation sweeps the country.  As deflation washes over a country, it becomes harder for borrowers to raise the dough to make their loan payments.  As more borrowers start to default, the banks get frightened and stop lending; but they keep gathering in their loan payments.  Because the Multiplier Effect works in reverse at the rate of 20:1, for every $1,000 received in loan payments that is not immediately recycled back out into a new loan, a whopping $20,000 get sucked out of the country’s money supply.

Then you REALLY have deflation, like we had in 2008, when at least four trillion dollars was destroyed.  Yes, money can be destroyed.  How else do you think the Fed could have injected $4 trillion into the economy without creating horrible hyperinflation?

The U.S. used to be the one shining star in terms of population growth.  Most of this population growth came from immigration.  The U.S. birth rate is not large enough to replace itself.  With the U.S. now preventing migration from the south, the population of the U.S. will soon start to decline.

Even China, which has lifted its One Child Policy, is shrinking.  The cost of education is high in China, so the typical Chinese family is saying, “Naw, no thanks.  One child is enough.”

Adding to this deflationary trend is the graying of each of the top ten economies.  Over a billion retired folks across the modern world are saying, “I’m done.  Take my life’s savings and give me an income.”

The problem is that there is FAR too much savings, too little growth potential, and not enough workers to do all of the work.  The young people are saying, through their lack of loan demand, “We don’t need your stinky money, old man and old lady.  We’ve got more than enough money to do what we want.”

There is too much saving retirement chasing too few borrowers.  Therefore, the price (interest rates) must come down.

Grasp this concept:  There is now almost $11 TRILLION dollars invested in bonds, CD’s and business loans with a negative yield.   Most of this is in Europe and Japan.  Did you know that in Europe you now have to pay your bank to accept your deposits?!

Investors in Europe and Japan are so desperate for yield that they are snapping up U.S. Treasury securities.  Did you know that the yield on the U.S. ten-year bond dropped from 2.03% yesterday to just 1.88% yesterday?!!!  The ten-year U.S. bond yield may drop below 1% within the next 18 months – maybe even within one year.

I don’t want the world.  I just want to refinance every commercial building in America with a lower interest rate.  Is that too much to ask?  🙂