Commercial Financing for Special Purpose Business Properties

Funeral homes, assisted living facilities, campgrounds and other special purpose properties represent one of the most difficult commercial loan situations which will be confronted by a business owner. Unique properties are not easily understood by traditional lenders, so the most common solution involves finding a non-traditional lender for funeral home financing as well as commercial financing for other special purpose properties. Such non-traditional lenders will be appropriate for purchase situations as well as refinancing and new construction.

KEY REASONS FOR DIFFICULTY IN ARRANGING COMMERCIAL FINANCING FOR SPECIAL PURPOSE PROPERTIES

(1) By definition special purpose properties are not similar to other commercial properties. This makes many lenders uncomfortable due to the likely difficulty of finding another owner for a unique commercial property should it be necessary due to a loan default.

(2) For funeral homes and many other special purpose commercial properties, most of the business value is represented by non-real estate assets. With traditional commercial lenders that focus on commercial real estate loans, it is almost impossible to get a loan based on the real estate value and the business value. For example, it is not uncommon to have a situation in which the real estate for a funeral home is valued at less than one million dollars while the overall business value is in excess of three million dollars.

(3) Because commercial financing is so difficult to arrange for special purpose properties such as funeral homes, assisted living facilities and campgrounds, sellers of such properties are generally willing to provide substantial seller financing to assist the buyer in acquiring the business. However, many traditional lenders do not recognize or accept seller financing as a means of reducing down payment requirements for special purpose properties.

(4) Many lenders simply do not understand the business complexities associated with a special purpose property. As a result, it is not uncommon for these lenders to attach onerous and expensive requirements such as business plans and environmental reviews. In most cases such lenders do not even want to make the business loan but will use undesirable loan requirements as a means of appearing to approve a loan when in fact they have disapproved the loan by adding commercial loan terms that they do not expect a commercial borrower to accept.

COMMERCIAL LOAN SOLUTIONS FOR SPECIAL PURPOSE PROPERTIES

For a business borrower facing the situation described above, the highest priority should be to locate a non-traditional commercial lender that engages in the following commercial loan practices:

(1) Openly welcomes special purpose properties and routinely finances such properties.

(2) Provides commercial financing for both the business and real estate.

(3) Accepts substantial seller financing.

(4) Does not add special requirements to the business loan for special purpose commercial properties.

(5) Has a history of making loans for the specific type of property under consideration.

(6) Can accommodate both small and large commercial loans for special purpose commercial properties (for example, loans as small as $100,000 and loans as large as $5 million or higher).

Copyright 2005-2006 AEX Commercial Financing Group, LLC. All Rights Reserved.

Fight Crime – Inventory Your Household and Business Property

The media is constantly reporting the effects catastrophic events including fire, tornado, hurricane, tsunami or most commonly theft and burglary. We do not think to expect that such disaster may befall us. However, in the wake of such an episode in our own lives, it behooves us to be prepared.

The police department of my city has provided residents with a free software for inventory of personal property. They believe that a resident inventory helps to fight crime in our city. They are partnering with insurance companies to make the program available to us. They recommend the inventory program called “Know Your Stuff” available online from The Insurance Information Institute. Find them at appspot.com or search Insurance Information Institute.

Three reasons to take stock of our household property need to be considered.

  1. Keeping an up to date inventory of what we own and reporting it helps law enforcement fight crime.
  2. Reporting loss of personal property to insurance companies when accompanied by an inventory, helps you get a fair settlement for your claim.
  3. The inventory you make helps you to determine the amount for which your household goods should be insured
  4. Klosing what you have worked hard to acquire for your family can happen in a matter of as few as three minutes. When you have inventoried your possessions, you have a very good chance of getting back any stolen or looted items. In my small Texas city last year police reports show that of the 21,602 pieces of stolen property they recovered, 15,000 never found their way back home.

When stolen property is recovered and residents have identifying serial numbers recorded, the property can be returned to its rightful owners. How to safeguard your stuff is not as difficult as it may seem. The Insurance Information Institute has developed free software. The program guides you through the inventory process and allows you to save photographs, as well descriptions and serial numbers.

The secure online storage built into the software allows you to retain your records. All you have to do, once you have established your inventory, is to be sure to keep it updated as you make new household or business purchases. In my neck of the woods there are police volunteers who help people navigate and utilize the inventory software.

Several years ago our home was burglarized. Police took fingerprints, filed the report and that was the end of it. We never recovered our stuff. Besides that, we had to have professional carpet cleaners restore our carpets to a reasonable condition. Muddy footprints were everywhere. We were lucky that the thieves were not looking for personal identifying information. They would have had a heyday.

Today, we have learned how to protect ourselves from mail theft. We are aware of the high incidence of identity theft. We have a steel locking mailbox, a locked safe, a document shredder and never throw any personal information in the trash for dumpster divers to pilfer. It is the responsibility of each household and business to invest a little time and care into keeping track of property. Law enforcement and insurance companies cannot do it all. Fight crime. Recover your stolen property.

Business Property Insurance Crucial After A Disaster

Many small business owners are still attempting to recover from the recent storm activity on the East Coast and could use some sound advice to deal with their insurance coverage. The first step for business owners who suffered an interruption in service and damaged products and property is to get in touch with their insurance agent. They are more than willing to assist in sorting out the particulars of the policy and help property owners get back on their feet.

Property Insurance and What it Covers

Property insurance typically provides coverage for damage or theft of the physical property and equipment of the small business. Anyone owning the physical structure (the building), their property insurance program should cover both the structure and its other assets.

Anyone leasing the space they occupy is likely responsible for insuring their personal property and other contents. As a leaseholder, there should be in place a contingency plan in case the landlord or their insurer is not able to promptly repair the building where the business is located.

Business Interruption for When a Disaster Occurs

Business Interruption insurance covers lost earnings due to circumstances stated in the policy, such as weather or a fire that shuts down a business for an extended period of time.

Certain events will trigger this insurance that generally covers expenses associated with running a business, such as payroll and utility bills, based on the company’s financial records.

Benefits paid under this type of coverage may not be payable for a certain number of days after the business interruption has occurred, based on the severity of the incident and the number of people and businesses affected. The insurance may also help pay for the extra expenses to keep the business operating until a full recovery is made.

General Planning for Potential Future Severe Weather or Natural disasters

Be sure to consider these issues ahead of a disaster:

  • Is there an emergency response plan for employees and customers?
  • Are there copies of important papers and information stored off site?
  • Does the stored information offsite include: receipts, photos, insurance policies, contact details, employee roster, etc.?

These documents will be of great assistance when disaster strikes, and later, when the time comes to file a claim.

Be sure to review current insurance policies – are policies up-to-date with insurance coverage needs, and are the limits for coverage at a level that protects investments? Speak with a professional insurance agent about the appropriate coverage and be sure to review policies every year.