Process / Loan Submittal
What upfront fees do you have?
There are no upfront fees prior to issuing a commitment. All we require is our one page submission as well as rent rolls and color pictures.
What is a hard money loan?
A hard money loan is any loan secured by a “hard asset” like commercial or residential real estate. It is sometimes called a bridge loan, private capital loan or private loan. A hard money loan is a first mortgage on investment real estate. A hard money lender looks to the property as the primary collateral as opposed to the borrowers credit score or other factors. A hard money loan is an alternative to a traditional bank loan.
What types of clients utilize this product?
Our borrowers are credit impaired, time impaired, property impaired, or in need of financing quickly for some reason.
How do I submit a loan?
Fill out our one page application and a loan officer will contact you within 24 hours (during normal business hours).
What property types do you lend on?
General commercial properties: office, retail, mixed-use light industrial, etc… along with residential investment properties in Georgia, Colorado, and Florida.
What is your min/max loan amount?
We lend from 50k to 2 million depending on the property type, location, loan to value, etc…
What is your max LTV?
50-60% of the value of the property (or purchase price whichever is lower). We do not require appraisals and look at each property (income and sales approach) to accurately determine value
How do you calculate LTV?
Based on the value that Fairview Commercial Lending determines we take a maximum of 60%; for example if Fairview placed the value on a property of 1 million, the loan amount would be 600,000.
Why use a hard money loan
A hard money loan is used for various reasons. The number one reason is time. The loan needs to close quickly for whatever reason. Our average close time is 5-10 days (depending on property, location, etc…).
Hard money loans can also be utilized when conventional financing is not an option including credit scores, income statements, etc…
What type of programs do you offer (interest only, etc..)?
We offer interest only loans along with amortizing loans depending on the needs of the transaction. The loan structure will be determined based on the unique situations of each transaction.
Can you do blanket loans?
We can do blanket loans on commercial properties. We cannot do blanket loans on residential properties
What are your rates?
There is no formal rate matrix since each deal is so unique. We price each deal aggressively based on the individual needs of the client, property type, loan to value, location,etc… Please call or e-mail us more details and we can provide a no obligation quote for free
Do properties have to be seasoned?
Typically not. The purchase price is usually a good indicator of value especially if it was a recent purchase.
What is your minimum credit score?
We do not have a minimum credit score. We are underwriting solely on the value of the property.
Can you do a CLTV? If so what is the max?
Combined Loan to Value is capped at 90%. Generally we do very few purchase transactions with large secondary financing. If there is secondary financing on a purchase, our LTV is typically reduced. The borrower is required to put at a minimum 10% of his/her own cash in the deal.
My borrower has good credit, but wants a “no-doc” program; can they get a better rate?
Possibly depending on the property type and the borrower’s credit. Fairview Commercial Lending will not be able to beat a full doc lender, but our rates are very competitive to stated lenders.
How do you determine rate?
Each transaction is unique and is priced individually based on the property type, cash flow of the property, etc… Fill out our one page application for a no obligation quote.
Are you ok with tax liens?
Yes.We understand tax liens and have closed numerous transactions with various tax issues. All of the tax issues are typically paid off at closing since we typically cannot close a loan with any material title exceptions.
Can you lend on a commercial property that is fully owner occupied?
Yes, we have closed hundreds of commercial loans on fully owner occupied properties.
What if the borrower is currently in foreclosure?
We can handle transactions where the borrower is in foreclosure as long as they have enough equity in their property to pay off the first lender to enable Fairview Commercial Lending to receive a clean first mortgage.
Do you do second mortgages?
Unfortunately we only do first mortgages.
What areas do you lend in?
Can you help a company with cash flow issues?
Absolutely. We have closed a number of transactions for companies that have cash flow issues. Our real estate financing solution is typically substantially cheaper than other financing (materials financing, etc.).
Can you help with the turnaround of a company?
We can assist in the financing of the real estate in order for companies to gain working capital and pay off debt (see article on business turnaround).
Can we close the loan in a corporation, LLC, etc…?
Yes, we can accommodate various loan structures based on the transaction.
Can you lend to foreign nationals?
Yes, we have done many loans for foreign nationals.
Underwriting / Valuation
Is your evaluation the same as an appraisal?
All underwriting is done in house by a staff of commercial real estate experts that evaluate hundreds of transactions per month. Our underwriting is based on both the income approach and sales comp approach. The value we place on the property is based on a 90-120 day sale period (not a fire sale, but a relatively quick sale of the property).
How do you value a property?
One of our in house underwriters pulls and analyzes comparables (properties that have sold, properties that have leased, properties that are available for sale, and properties that are available for rent). We will evaluate properties based on the income approach (comparable leases) and the sales approach. In some cases only one of the approaches might be valid for determining the value.
What is DSCR (debt service coverage ratio)?
Debt Service Coverage Ratio (DSCR) is the amount of cash flow available to meet annual interest and principal payments on debt.
How is DSCR calculated?
It is calculated as net operating income/total debt service.
Why is DSCR important?
Debt service coverage ratio is used by most lenders to ensure that the cash generated by the property is sufficient to cover the interest payments to the lender. Any number greater than one shows positive cash flow to cover the debt obligations. Any number less than one shows that the property’s cash flow is not sufficient to service the debt.
Does Fairview Commercial Lending require a debt service coverage ratio greater than one?
No, we do not require the debt service coverage ratio greater than one although if a property is not currently producing a positive cash flow, we typically set up an interest reserve to cover the payments until the property can fully cover the debt obligations. (see FAQ: What if the property does not cash flow?)
How is the debt service coverage ratio calculated for a fully owner occupied property?
Assumptions are made for market rents, expenses, vacancy, etc. to determine an estimated net operating income for the property.
What if the property does not cash flow?
We are ok with properties that do not fully cash flow. We have done a number of loans of this type.
How do you value a non-cash flow producing property?
We will look at the sale comparables approach (valuation) as well as make assumptions of market rents, vacancy factors, expense ratios, etc. to determine a possible value via the income approach.
What is Cap Rate?
This is the rate of return that a reasonable investor would expect to receive as a result of their investment.
What Cap Rate do you utilize when valuing a property?
Each property and market is unique. There is no blanket cap rate used in our underwriting.
How is cap rate utilized?
The cap rate is utilized in underwriting to determine the value of the property based on the income approach.
What is the formula to calculate value based on the income approach?
One method to determine the value of the property is to take the net operating income/cap rate.
How do you value a fully owner-occupied property, since there is not a rent roll?
We will make assumptions on market rents to back into a value via the income approach. We will also utilize the sales comparable approach (see FAQ: How do you value a property?).
How soon can you close?
We lend our own funds and can close quickly. Our typical close time is 5-10 days depending on the borrowers needs. We close and fund the same day
Do you require an environmental?
Can the borrower use one if they already have one completed? Typically a phase one is required on each property. If the borrower has an environmental less than 6 months old and it meets our requirements we can typically utilize it. The environmental is ordered after our property inspection and the final commitment is issued. This is normally paid out of the closing proceeds.
Can you do a 6 month interest reserve?
Yes, depending on the borrower’s cash flow we like to set aside an interest reserve to ensure that the borrower has a nice cushion so that they can focus on rebuilding their business, etc…
How are you able to close without an appraisal?
We fund with our own capital and therefore are not bound by the same requirements as a traditional lender. All underwriting decisions are made in house by a team of seasoned real estate experts that understand the uniqueness of each market and each deal.
Do you fund and close the same day?
yes, we close and fund our transactions the same day.
Explain your pre-pay?
Each pre-pay is unique to the deal. It is typically a declining pre-pay.
How is your pre-pay different from other lenders?
Most lenders impose a lockout or a very steep pre-pay (defeasance) that makes it impossible to refinance the loan in the first several years of the transaction. We never impose a lockout or utilize defeasance. Each of our transactions is structured to fit the needs of the particular borrower.
What is defeasance?
- Real Estate Weekly defines defeasance as a substitution of collateral. Typically, the borrower uses proceeds from a refinance or sale to purchase a portfolio of U.S. government securities that is sufficient to make all of the remaining debt service payments required by the note. The securities are pledged to the lender, and the lender releases the real estate from the lien of the mortgage. The note remains outstanding but is assigned by the borrower to an unaffiliated successor borrower, who makes the ongoing debt service payments.
- The penalties associated with paying off a loan that has been securitized in the secondary market can be extremely expensive. The penalty can be calculated at: www.defeasewithease.com or any other number of websites.
Do your loans have defeasance?
No, none of our loans utilize defeasance.
Brokering Loans to Fairview
How does a mortgage broker get paid?
Prior to issuing our loan commitment we receive a copy of the fee agreement between the broker and the borrower. This information is given to the closing agent and compensation is disbursed at closing.
What do I need to do to get set up as a broker with you?
There is no setup process to fund a loan through Fairview Commercial Lending. We do require a copy of a fee agreement between you and the borrower. The mortgage broker needs to ensure that they are licensed in their respective state.
Is there Yield Spread?
Unfortunately we require all fees to be up-front on the settlement statement and do not allow up-selling of rates for the broker to fain more fees.
Do you allow table fundings?
No, not at this point in time. All loans are closed in Fairview Commercial Lending’s name.
Questions Regarding Fairview
How is Fairview Commericial Lending different from other competitors?
Many of our competitors are not direct lenders and merely broker loans. Fairview is radically different in that we underwrite, hold, and service all of the loans we make. We are also able to offer loans as long as ten years. Since we are privately funded and hold all the loans we make we are able to fund transactions that don’t fit traditional lending guidelines.
Do you fund your own loans?
Fairview is a direct hard money/private money lender that funds all of its own loans
Do you service your own loans?
We do, all the loans we make are held in our portfolio
Are you a broker?
Fairview is not a broker, we are a direct lender that underwrites, funds and services its own loans. We are able to work with both mortgage professionals and directly with borrowers on their loan scenarios.
Where is Fairview Lending located?
Fairview’s primary offices are in Atlanta, GA (Sandy Springs) and Denver, Colorado (Evergreen), we also have partners located in FL and IL. All our loan servicing is done out of our Atlanta, Georgia office.
How do I know Fairview is a real Lender?
Fairview has an A+ rating with the BBB since 2005. We have also been featured in the Colorado Real Estate Journal, The Colorado Biz Magazine, The Scotsman Mortgage Guide (both residential and commercial) and named a top 100 mortgage professional by its peers in mortgage professional America. Fairview is also a proud affiliate of the Rocky Mountain Commercial Brokers. Fairview is well regarded in the industry as a straightforward lender with no upfront fees. We provide honest answers quickly and have been lending since 1975.
What is factoring (definition, etc..)?
For receivables factoring, the invoices are assigned to the factor and they charge a fee of ~2-4% for 30 days. If for example, a small business sold a widget for $100, they billed the customer, the factor would come in and give the small business $96 today for the invoice. When the customer that bought the widget pays the invoice in 30 days, the factor receives the entire $100. Inventory can also be factored. In the case of inventory factoring, a factor will make a loan to a small business with their inventory as collateral. Rates are typically very high for inventory factoring and the loan is typically <30% of the market value of the inventory.
Do you have a question not answered above? Please e-mail us.