Commercial Loans. Who does them? What is a good rate?

Can anyone tell me what a good commercial loan rate is and where to get one? I currently have a loan on my steel building and VMC. The longest they would stretch it out for is 10 years and it is at 6.5%. I am not sure if that's good or not but I would like to get the rate down lower and also stretch the length to maybe about 14 years if possible. Can anyone suggest a bank or is my current loan as good as it gets?

Thanks

You may be able to get a cheaper rate on your building if you own the land its on and give a mortgage to the bank on the land and building. That way they have more collateral so they have a better security position. You may be able to net enough from the land/building combination to pay off the VMC.

I should have mentioned the loan is on the machine, the building, and the land. Does anyone know how a bank values machinery like a VMC? Do they appraise it or is there like a bluebook for equipment? If anything I would like put the loan on just the machine because I would like to build a house on this property in the next year or so and being free and clear may make things easier.

Just how much money are we talking about here?

Commercial money is very hard to get, even with a fully paid for building in the middle of town I could not get a mortgage on the property. I own it out right free and clear and it appraises at 300 grand and those cock suckers wont lend me a nickle on it. I have resigned my self to pay cash for everything, being self employed seems to be the big stumbeling block.

You did it in the wrong order......Always build the house first, its easy to re mortgage a house to get money for the shop and a machine.

SBA will go out to 35 years on real estate and up to 12 years (I believe) on certain machinery. Go to sba.gov and look at the 7a program.

How many of us who are fully self employed have been able to get a real loan for a significant amount of money from a bank. I am not talking about 50 grand I mean the kind of cash you need to purchase property. I wanted to refinance my home and they turned me down I needed to get a truck and I was told nope not gonna happen. I have stopped asking banks I now just use credit cards to make big purchases and I pay them off fast, I bought my truck with a credit card and payed it off in 5 months. When I payed off my house they suddenly contacted me and asked if I would like a 10,000 dollar line of credit on it. Screw you, when I came in and asked for a mortgage on my building you said no when I wanted to borrow to buy a truck you said no and now that I own my house you want me to borrow against it. IF I worked in a grocery store for miniumum wage they probably would have lent me enough money to hang myself with, but working for myself they dont have real leverage or a way to garnish it if I dont pay, at least this is all I can figure.

I am working on a 15 fixed for 5.4 % thru Wells Fargo right now . They will only do a 20% loan to value on what I am doing though.

kpotter said:

How many of us who are fully self employed have been able to get a real loan for a significant amount of money from a bank. I am not talking about 50 grand I mean the kind of cash you need to purchase property. I wanted to refinance my home and they turned me down I needed to get a truck and I was told nope not gonna happen. I have stopped asking banks I now just use credit cards to make big purchases and I pay them off fast, I bought my truck with a credit card and payed it off in 5 months. When I payed off my house they suddenly contacted me and asked if I would like a 10,000 dollar line of credit on it. Screw you, when I came in and asked for a mortgage on my building you said no when I wanted to borrow to buy a truck you said no and now that I own my house you want me to borrow against it. IF I worked in a grocery store for miniumum wage they probably would have lent me enough money to hang myself with, but working for myself they dont have real leverage or a way to garnish it if I dont pay, at least this is all I can figure.

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I think it matters a little how your business is structured. My old company was a 10 employee small business (c-corp). The owner was paid a salary as an employee of the company and as far as I know didn't have too many problems once he was in business for a few years. Having a good local banker who understands your business is obviously a huge help.

The building was purchased through a separate llc, but all the equipment loans were through the ccorp.

pvsora said:

I think it matters a little how your business is structured. My old company was a 10 employee small business (c-corp). The owner was paid a salary as an employee of the company and as far as I know didn't have too many problems once he was in business for a few years. Having a good local banker who understands your business is obviously a huge help.

The building was purchased through a separate llc, but all the equipment loans were through the ccorp.

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That well used to be true. Unfortunately, the reality today is:

1) Consolidation in the banking industry means there are essentially no "good local bankers" anymore. When I started in business over twenty five years ago, we dealt directly with the president of our local small town bank. The vice president would drop in from time to time just to see what we were up to and how we were doing. All those people are gone, and the local bank is now a branch of Mega-Bank, run by a branch manager with no more authority than a head teller. The new bank started by the former second level officers of the original bank has also been bought out, and branches of several other nation-wide banking chains are no better. Branch banking sucks, but that's the way it is.

2) The events of 2007 and 2008 have made what few bankers do have any authority VERY risk adverse. Why stick one's neck out to make a possibly risky loan when one's job preformance isn't rated by the number of loans you make?

3) The Federal Reserve policy (just recently ended) of giving the big banks 0% free money means they don't need your stinkin' monee... so why bother making loans? Mega-bank has whole buildings full of people who take that free Gov't money and invest it in the markets... why would they ever want to lend any to you?

All that being said, I understand that some credit unions actually still lend money to small businesses, youmight try that route.

Dennis

Sorry I cant help on the commercial loan, but IME small local banks are the way to go otherwise. I went from keeping all of my money with big banks to lil ones after I noticed the general attitude of the employees is actually helpful in the local banks whereas its rather snotty and less than helpful at the big ones. Its everything from major lending to small clerical things, everything's easier. At the big banks if I didnt have a deposit slip theyd treat me like an idiot and a nuisance, at the various local ones Ive been with they just take the signed check and deposit it without one. 2007-08 my local bank MADE money while the larger ones lost it When I moved to the midwest and went looking for my current mortgage all the big banks told me outright no, the computer says no. My local bank manager/loan officer told me the opposite. He looked at my previous (back east, also local) bank statements, saw a healthy 5-figure balance consistent over a decade, looked at my paystub and saw a healthy income, then told his computer to piss off and asked if I'd open an account if I got approved for a mortgage from them. I agreed to open a checking account, mortgage was approved instantly.

JMO but I treat the big banks like Walmart and the crap grocery stores - I have no use of them and wont set foot in them unless forced.

CWB said:

Sorry I cant help on the commercial loan, but IME small local banks are the way to go otherwise. .

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Agreed.

I have business accounts at two local banks. One is a 6 branch bank very local, one is a northeast regional sized bank(Covers New England). But both know me personally and hold some of my money. Even having a couple year relationship with the people inside the bank/loan officers and them having the ability to see the money go in/out of your business accounts goes a long way ime.

Of course personal credit scores, debt, income, collateral etc will greatly effect a decision/rate. Having the people you plan on loaning from see you weekly and feeling comfortable will help some.

On one of my business lines of credit I have known the lending officer for a few years, we get along well and he understands my business. What that means is he goes to bat for me, and his opinion matters in the decision making process at this one local bank.

I remember the first time I needed money quickly. I had been in business for 3 years (S-Corp with me as owner and employee) and had my first really good year. The company made about $800k in profit with only 10 employees. I bought new computers for everyone, 2 servers and rolled out Small Business Server with an exchange server, a half dozen licenses for ACAD, some shop equipment and then . . . I did my taxes. At that time I became acquainted with the concept of "depreciation" and was enlightened to the fact that I hadn't accounted for it with my tax planning with all of my gleeful spending.

I owed just over $300k in taxes plus about $80k for my first quarterly estimate . . . I had about $250k in the bank and another $100k out in accounts receivable and I had spent most of the rest buying materials for a large order we had just received.

So that left me about $130k short to pay my taxes. After making more money than I ever thought possible, I was now in bigger financial trouble than I had ever been. I walked up the sidewalk to "Northwest National Bank of Yacolt" (started in 1910 as Bank of Yacolt) . . . and sat down with the bank manager Nancy Tester. I told her my story and she reviewed our account history and my credit rating and within 24 hours she had set me up with a line of credit for $150k and I was able to pay my taxes and then get caught up paying her back over the next 6 months.

Since that experience, we always go with small locally owned banks.

When we moved to the big city - we bought a $1.6million building with an SBA loan partnered with Wells Fargo (via separate LLC) - we borrowed at 90% loan to value ratio with a composite interest rate of ~ 6.5% in 2002. We paid the building off in 2012.

In 2015, we will likely need to buy yet a larger building - we plan on looking at the SBA option again. Or we might try crowd funding via our employees and invite those who are more entrepreneurial and open to risk to own part of the new building.

motion guru said:

... and then . . . I did my taxes. At that time I became acquainted with the concept of "depreciation" and was enlightened to the fact that I hadn't accounted for it with my tax planning with all of my gleeful spending.

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You too? Glad I wasn't alone.

Dennis

When i started my own busines, not in machining though, i started out of my home.
A year or so later i rented a premisses in the centre of town.
I rented it for a period of three years with the right to buy it before the lease was over for a fixed price.
Three years on property values had risen so i wanted to buy the place.
Went to the ABN-AMRO bank and got turned down because my balance wasnt to their liking.
Although the montly payments to the bank would have been considerably less than my rent.
Ended up with my wife buying the place and renting out to me.
She got the money from the bank because she was to let out the premisses to me at exactly the same rent as the amount she was to be paying to the bank.
Years later the bank went nearly bancrupt because of dumb ass stupid multi billion investments abroad and was bailed out by the state with billions, in effect becoming state-owned.
The people responsible for the investments weren't sacked straightout but got layed off and received multi million dollar severance payments.

swatkins said:

Just how much money are we talking about here?

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About $48,000 total.

moonlight machine said:

You did it in the wrong order......Always build the house first, its easy to re mortgage a house to get money for the shop and a machine.

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Yes I found that out quickly but I figured get the shop up first and I can have a better paying job sooner working for myself.

Why, oh why, would you want to pay interest on 48,000. for 14 years?

I just bought a tractor... Interest is 2.4%.... payments 775.00 a month.... Loan is for 51,000 and I will be finished paying for it in 6 years..

I could have payed cash but I am making more than 2.4% on my money right now so I'm going to use their cheap money for a while

Might not be what you want to hear but I would work longer, or get a second job and pay off your current loan sooner...

kpotter said:

How many of us who are fully self employed have been able to get a real loan for a significant amount of money from a bank. I am not talking about 50 grand I mean the kind of cash you need to purchase property. I wanted to refinance my home and they turned me down I needed to get a truck and I was told nope not gonna happen. I have stopped asking banks I now just use credit cards to make big purchases and I pay them off fast, I bought my truck with a credit card and payed it off in 5 months. When I payed off my house they suddenly contacted me and asked if I would like a 10,000 dollar line of credit on it. Screw you, when I came in and asked for a mortgage on my building you said no when I wanted to borrow to buy a truck you said no and now that I own my house you want me to borrow against it. IF I worked in a grocery store for miniumum wage they probably would have lent me enough money to hang myself with, but working for myself they dont have real leverage or a way to garnish it if I dont pay, at least this is all I can figure.

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In 1998 I bought out my ex and refinanced the house with a 120k mortgage after 8 years in business and 6 years of no 'real job' from a LOCAL BANK

In 2001 I borrowed another 60k to add on from a LOCAL BANK

In 2003 I dropped it to a 15 year loan from a LOCAL BANK


In 2003 I went to a leasing company to get a 100k machine with 4k up front. It was the first time I spoke with a banker who understood what my tax return said [IE depreciation vs spending cash]


In 2009 my current SO and I bought a house before selling our prior house resulting in a over 700k mortgage, from a LOCAL BANK. We are both self employed

IN 2013 Refi this house to a 15 year loan at 2 something percent through a different LOCAL BANK

Yes you need to make money to borrow money, same as working for a W2, but I have not received a W2 since 1992 and it has had little affect on my borrowing.

The advantage to using a LOCAL BANK is that no matter what your tax return says, they know what your cash flow is, and they to some extent know who you are. And they need your business.

How much does Chase need your business?