Commercial Real Estate Construction Loans

Most commercial real estate loans provide for terms that force the developer into the position of - more or less - working for the bank that makes the loan because of the cross-collateralization requirement, cross-default requirement and personal guarantee requirements.

By accepting the terms of the lender, more often than not, the developer has to pledge all of this assets - including any future income those assets may generate - to the lender.  The developer becomes a defacto servant of the bank.  The bank decides when the developer can expand, how fast the developer can grow his/her company and what cash flow the developer will actually be entitled to receive if the deal works out.

If this is something that you find unacceptable, then Rainmaker would like to suggest that you consider your alternatives, including:

• Syndications.  A real estate syndication will provide more equity into the transaction.  The additional equity capital may entice the lender to make the loan without a personal guarantee.

• Private Placement Offering.  A private placement offering is sometimes used to raise additional equity.  Rainmaker suggests this route be taken in cases where there are local, state and/or federal investment incentives the proposed project may in fact qualify to receive.  By using the incentive as the basis of the transaction, the prospect for a dilution of the developer's equity ownership interests can be dramatically reduced, thus increasing the developer's financial investment leverage far beyond what would otherwise be possible.  Check with a Rainmaker consultant on this issue as an entitlements review takes a bit of time to fully document.

Time to talk to someone who has some real answers; answers you can use to make your project work for you.  Call Rainmaker today and ask for a free initial consultation and demand answers.