Integrity Capital
 
 
Solution Oriented, Quick Response and Niche Industry
 
Get Started

Commercial Warehouse Financing

Loans For Warehouse Facilities

 

Commercial lending for Warehouse/Industrial facilities can be broken down into two categories, which are owner occupied and investment.  This article will give both a brief look and educate you on how to obtain the best loan possible.  

Owner Occupied Warehouse Loans

Cash Flow:  This is when a company occupies 51% of the property with their business.  The lender will predominantly underwrite the cash flows of the business to determine how much someone can borrow.  What this means is the lender will calculate the net cash flow by taking the net income of a business for the year, add back interest expense, depreciation and possibly rent.  This number will give them the cash flow they need to determine what they can borrow.  The magic formula is what is called the debt service coverage ratio of 1.25.  Here is an example:

Net income is 100,000
Depreciation is 15,000
Interest Exp is 10,000
Total Cash Flow is 125,000

Payment on a new loan is 100,000 a year.  You will take the 125,000 of Total Cash Flow and divide it by the 100,000 payment and you come up with 1.25 times.  If one falls below this number, then it makes it more difficult to get a yes from the lender.  

Character:  The lender wants to see how your operate your business.  Are you showing all the profits you make on your tax returns?  Are you focusing on taking care of the customer and it shows in your reviews online?  Do you run your business with honesty and integrity?  Lenders are very focused on who you are and how it shines in your business.  

Credit:  When we talk about credit, it is much more than just a fico score.  The lender wants to see if you have had any bankruptcies, foreclosures or short sales.  They want to really know how dedicated you are to stability in making payments.  If, however, you have had some credit gliches, then just be prepared to provide good explanations with supporting information.  

Now the question is, if you qualify, then what terms are available?  Here you go…

SBA General Terms:

  • Loan to value is ranging from 85 to 90%
  • Rates now are ranging from 4.5 to 5.5%*
  • Amortization is 25 years
  • Prepayment are step down
  • Origination is 1 to 1.5%
  • Fees are 2.5 of the loan amount
  • Terms are 5, 7, 10 and 25 years fixed
  • Reports are Appraisal, Phase I, ALTA Survey and Title.  
  • 60 to 70 day close

Conventional Terms

  • Loan to value is ranging from 75 to 80%
  • Rates now are ranging from 4.5 to 5%*
  • Amortization is 25 years
  • Prepayment are step down
  • Origination is 1 to 1.5%
  • Terms are 5, 7 and 10 years fixed
  • Reports are Appraisal, Phase I, ALTA Survey and Title.  

*as of 5/27/20 (call for current rates)

Income Producing Warehouse Loans

Cash Flow:  The cash flow will be generally the same, in terms of a debt service coverage ratio, but there are a few differences.  Lenders will take the gross income, apply a vacancy factor (probably 5 to 7%), then take the operating expenses, add a 4% management fee, take out 10 to 15 cents of reserves to come up with a cash flow.  Here is an example:

Gross Rents    200,000
Vacancy 5%      10,000
Effective Inc     190,000
Op Expenses      60,000 (includes 4% management)
Net Income    130,000
Reserve                 1,500
Net Cash Flow    128,500

From here you will calculate the payment of the loan amount, which in this case is 102,800 a year.  You take the 128,500 and divide it by the 102,800 and come up with 1.25 debt service coverage ratio.  Please note that the max LTV nowadays is about 70 to 75% LTV.  

All the other areas apply, i.e. Character, Credit.  Lenders will emphasize more on the quality of the tenants and how long the leases are.  Here are some general terms:

Life Company:

  • Loans from 65 to 70% LTV
  • 25 year amortization
  • Prepayment Yield Maintenance
  • Terms are 5, 7 and 10 year fixed
  • Fees are 1% to IC and 1% to the Life Company
  • Legal fees are about $10,000
  • Closing days are about 60 days
  • Recourse and non recourse available
  • Appraisal, ALTA Survey, PCA report and Phase I

Conventional Bank

  • Loans from 70 to 75% LTV
  • 25 year amortization
  • Prepayment none to step down
  • Terms are 5, 7 and 10 year fixed
  • Fees are 1% to IC and 1% to the Bank
  • Small doc fee
  • Closing days are about 60 to 70 days
  • Recourse on all loans
  • Appraisal, ALTA Survey, Phase I

Have questions? Please feel free to call 480-219-1205. 

 
 
 

We Have Closed $700,000,000 In Loans To Date


Hot Money Updates - Enter your email for free monthly updates on commercial financing.

 

As Seen In:

Integrity Capital As Seen In Logos

Email Us




© 2020 Integrity Capital, LLC. | Privacy | CMB #0919680


Return to Top