Below are a few of the common uses of the commercial equity loan.
Use Equity Loan Proceeds as Down Payment on New Acquisition.
For example, borrower could pull equity out of an existing property and use that capital as the down payment/closing cost on a new property purchase. Essentially maximizing the overall leverage of the property owner’s portfolio and limiting out of pocket cash.
The underwriting of the second loan would be off the existing property and would not negatively affect the cash flow and or Debt Coverage Ratio of the property being purchased.
Use this Commercial Equity Loan as Rehab Capital.
Unfortunately commercial rehab loans are as daunting and cumbersome as ground up financing, requiring extensive underwriting and reporting. By tapping the equity in another property via a our second lien position loan the borrower can avoid the “process” of a traditional construction loan. The borrower in this example would simply receive a lump sum of capital and can spend this money as he sees fit. There would be no draws or city permit review/approval to go through before receiving capital.
At the end of the project the borrower could perform a commercial property refinance on the property being renovated and use those proceeds to pay off the commercial second mortgage with better loan program tied to the rehabbed building.
Use as Business Property Loan for Day to Day Business Activities.
Use this commercial building loan as a capital source for business purposes. Launch new venture, purchase equipment... Business owners have virtually no restrictions on the use of loan proceeds.
