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Restaurant FundingRestaurant funding is a dynamic area of the commercial mortgage industry as banks appetite for this building types varies widely. The special use nature of the propertuies themselves, as well as the relatively high rate of bankruptcy/foreclosures makes lenders conservative. Another issue is the high level of seller financing within the restaurant industry which further complicates and creates additional risk for banks.
Restaurant LoansHowever, owners looking for restaurant loans are often pleased to learn of the new programs available to them. 30 year amortization as well as stated income loans are a few examples. Below is a breif description of the underwriting guidelines for restaurant loans. LTV - CLTV Loan to value restrictions on restaurants refinances are typically capped at 60% on both rate and term or cash out refinances. However, there are lenders that will allow higher leverage. On purchases borrowers can expect 85% financing via the 7a SBA program or as high as 90% with a blend of seller held financing (sits in second lien position) and conventional loans. For example, if the first lien position existing convention loan is at 70% loan to value and the seller held is at 20% loan to value the purchaser would only have to put down 10%.
Debt Service Coverage Ratio restrictions are typically conservative at 1.3 to for this building type. Meaning that for every $1.30 of net income (income after taxes, insurance, repairs, etc) the property produces, the mortgage payment will not be allowed to exceed $1.00. Said in another way, after all expenses and the mortgage have been paid, the owner will need to net $.30 to qualify. Due to the cash nature of this business, stated income loans, (where borrower does not have to provide tax returns) can be a solid option for owners that do not show enough net income to qualify for traditional loans. With this type of loan the DSCR discussed above is not relevant.The SBA 7a loan program will allow DSCR as low as 1.1. Property Analysis Great caution will typically be used as market value and market rent is evaluated and compared to the subject property. Age, appearance, location, accessibility, and local market conditions, as well as other factors are considered.
Credit Worthiness We have some of the best non franchise and franchise restaurant loans in the market today. Get your restaurant funding handled and complete, get PreApproved now or call 248 885-8797 to discuss your situation.
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