LOAN PROGRAM OVERVIEW
Financing options include bank financing, private money and various government programs. The type of property will determine the type of financing that may be available for any specific situation.
Private lenders are the most flexible as they can make their own decisions. There are large and small private lenders with a variety of specializations. For example, there are private lenders that only lend on Shopping Malls, or apartment buildings, or other specialties. There are private lenders that will only lend short term on rehab properties. There are hard money lenders for distressed properties
Interest rates, terms and conditions are determined by the type of loan and the risk. Private lenders can make their own decisions, so terms will vary over a wide range.
Banks are limited by many rules including the FDIC and other regulatory agencies. Often a bank may refuse an excellent loan situation due to the regulatory situation. For example, the bank may have too many farm loans, or too many motel loans, etc. The banks are at the mercy of these governmental agencies.
Government loan programs are varied and often very specific. In this difficult economic times, the government programs may be the only option from many situations.
For the following programs, the money comes from private sources and the government insures portion of the funds loaned to the borrower. Most of these programs are only available thru independent lenders and brokers.
SBA Microloans: The SBA Microloan program is for small business loans. This program is administered by local banks.
SBA 7a. The SBA 7a program is limited to businesses only. It cannot be used for apartments, or retail buildings that are considered investments. For example if a borrower owns a strip center and the borrower has a business using 51% of the floor space, the borrower can rent the remaining space. However, if in investor rents the majority of space in a building, the situation does not qualify for a SBA 7a loan. A SBA 7a loan can include working capital. The SBA 7a program is often the first choice for many businesses.
SBA 504. The 504 program is for fixed assets such as land, buildings, and long life machinery. This program has higher loan limits than the SBA 7a program.
USDA Loans. The USDA Loan Program is administered by the department of Agriculture. The loans can be farm loans, but the loans can be for a variety of businesses in rural America. This is the best program for rural businesses that will generate additional employment in rural areas.
Farmer Mac Loans: This program is excellent for long term agricultural loans. There are a variety of options from short term financing to long term financing.
HUD 223(f) Program. This government program is excellent for refinancing of larger apartment complexes. No other program offers such huge benefits to the apartment owner. The present interest rate is less than 4% fixed for 35 years. Loans must be greater than two million dollars.
Other Loan Programs: There are many other government subsidized or insured loan programs for specific industries or situations.