Low Interest Loans Available

Borrowers clamoring for low interest loans in today’s environment often are bemoaning the fact that we don’t have rates in the 3% range anymore. But that myopic view overshadows the fact that low interest loans are still available. We have rates in the mid 6% range for qualified borrowers.

The Trouble With Bank Loans

Banks have these low interest loans as well, but these are saddled with restrictions. LTV may be as low as 50%, and the borrower must have a banking relationship. They are often required to keep substantial funds in account at the bank — $MMs for larger deals. Not having access to those bank deposits means the cost of funds is higher.

Prepping for Interest Rate Drops

With the expectations that interest rates will eventually come back down, many of our borrowers are opting for a 5-year term that can be refinanced back out when rates drop.  This allows you to benefit from the lower rates today, yet not be locked in for extended periods of time.

The Yield Maintenance Conundrum

One of the difficulties that comes with low interest rates is higher prepayment or yield maintenance over the loan term.  We can sometimes do what we call a “5×4”, which is a 20-year lock-in rate that is renewable in 5-year increments. So, if rates go down at the end of a 5-year term, the borrower can get out. If rates remain comparable, they can review for another 5-year term without having the expense of refinancing.

Requirements for Low Interest Loans

We can offer low rates over 5–20-year terms at 30-year amortization. The rate is the corresponding treasury for the term (e.g. 5,10,20) plus 225-250 basis points. LTV is 65-70%.

• $2MM minimum loan amount
• 25 DSCR, 1.3 preferred
• At least 90% occupancy
• Multifamily, Warehouse, Industrial, Retail, and some Office
• Leases commensurate with the term, strong tenants a plus — anchors preferred
• Major metro areas, some secondary considered, no tertiary

Submitting a Loan Request

When applying for our low-rate loans, borrowers need to include:

• Executive Summary
• Sponsor background and Personal Financial Statement
• Last 3 years’ financials and Year-to-Date financials
• Rent Roll

Yes, rates are higher than desired right now. But rates in the 6% range are much better than the market as a whole, especially when the prime rate is 8.5% today!

Some borrowers still don’t want to lock in at today’s low rates. They prefer to wait it out and see if rates drop in the near future. For those borrowers, BEP offers interest-only bridge loan options that avoid prepayment penalties and can later be migrated into longer term loans.

Boulder Equity Partners LLC is a nationwide lender for commercial real estate offering a wide range of loan programs including construction loans, perm loans, and bridge loans.