Browse Tag: finance

The Big Payback: 2016’s Non-Bank Commercial Debt Maturity Spike

English: Mortgage debt

The Mortgage Bankers Association’s combined national numbers for commercial mortgage debt held by non-banks tell an interesting tale. The total dollar amount of maturities has risen a sharp 51% from 2015, meaning more debt will mature – yet the bottom line is that principal balances are increasingly prepaid and paid-down. Michael Gerrity’s piece in World Property Journal spells it out:

“More commercial and multifamily mortgages are maturing in 2016 and 2017 than have the last few years, but early refinancings and pay-downs are chipping away at those totals. The bottom line is that the ‘wall of maturities’ that has been the focus of concern the last many years is receding,” said Jamie Woodwell, MBA’s Vice President of Commercial Real Estate Research.  “Last year’s survey tracked $225 billion of commercial and multifamily mortgages that were set to mature in 2016.  This year’s survey found that 2016 maturities had dropped by 18 percent, to $183 billion as loans prepaid and paid-down.  That’s roughly the same amount that matured in the year 2010.”

The “wave of maturities” in the space — approximately $350B worth set for the three years 2015-2017 — do suggest that a whole lot of refinancing is expected for those loans needing it.  The specter of rising interest rates means the price of financing may be set on a collision course with the demands of of extra commercial borrowers feeling the pinch.

Can Having The Wrong Facebook Friends Interfere With Your Financing?

In commercial real estate, as with most commercial financing, a borrower’s personal credit rating looms large in the eyes of “A” list lenders offering the most attractive interest rates.

A recent patent filed by Facebook has raised eyebrows, suggesting that the credit ratings of your Facebook friends could possibly affect decisions made by lenders about you — or by extension, about any entity doing any borrowing where your personal liability is a factor.

As reported in The Atlantic by Robinson Meyer, the online giant Facebook recently made a patent filing totaling many pages, saving the best for last. Nestled toward the tail of Facebook’s US Patent And Trademark Office filing, under a heading “Summary Of The Invention,” (a list containing technologies they seek to patent) Facebook included the following paragraph:

When an individual applies for a loan, the lender examines the credit ratings of members of the individual’s social network who are connected to the individual […]. If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application. Otherwise, the loan application is rejected.

The suggestion is that Facebook seeks a patent on the ability to speak to your creditworthiness by allowing analysis of the creditworthiness of your Facebook friends.  Conspicuously missing from the above wording: any mention of a fair analysis of your own hard-earned credit rating.

A Return Of Redlining?

Critics of the practice of amassing Big Data from every corner of the lives of consumers, tenants, or users of a social media platform like Facebook have warned for years about future unintended consequences. It doesn’t take much imagination to see Facebook’s proposal as one such problem. What’s more, the future isn’t the only place where data about borrower’s surroundings have been unethically treated as conclusions about a borrower’s creditworthiness. In the context of the real estate industry, the notion of making credit decisions based upon one’s “neighborhood” has a specific and sad social-legal history, called redlining.

Decades-Old Legal Framing

The recent shifting picture of technology innovation having its way with the credit scoring industry — itself worth its own post — runs up against the legal barriers set down in 1970 under the Fair Credit Reporting Act and, in the case of any loans issued on the basis of such reporting, the Equal Credit Opportunity Act of 1974.  Any classification of Facebook as a credit reporting agency akin to TransUnion or Experian would be a application of laws written decades before social media information began to voluntarily flow from all of us, a troublesome and awkward legal situation to say the least.

While this patent application is preliminary and comes with no evidence Facebook is actually using or marketing credit data on its users, at least one overseas company is claiming to aggregate Facebook and other social media data to provide lending decision support.  From the Atlantic piece:

Which isn’t to say that social-network-based credit is an irreparably bad idea. In countries that do not have America’s financial system, friend scores can help extend credit to those who need it. In Mexico, Columbia, and the Philippines, a company called Lenddo already analyzes someone’s Facebook, LinkedIn, and Twitter to gauge their creditworthiness.

Newest Warning From The East

As if on cue, we find a very recent announcement by China’s government, saying that it will be holding certain online actions of its citizens and their social media friends in bad light credit rating-wise. This news, taken seriously by the ACLU  serves as yet another warning among many:

These days, it’s worth keeping in mind that online, we’re all a small part of Big Data.

The Five Kinds Of Commercial Real Estate Term Loans


Chinwe Onyeagoro, CEO, FundWell

[Today’s post is the first in an exciting new series on the intersection of commercial real estate and financing with special guest blogger and FundWell CEO Chinwe Onyeagoro. FundWell is part of the REach 2014 class of companies, recognized for their work to expand financing options for the commercial market. See FundWell’s website  for more info and stay tuned here on The Source for updates about how to register for our upcoming webinar with Chinwe later this month! –WG]

There are many different kinds of financing options for commercial real estate deals. And understanding the mix of commercial loan products available to you and your clients could make the difference between completing a transaction and losing it. 2013 was a very good year for commercial real property investors. According to CoStar COMPs data, sales of office, industrial, retail, multifamily, hospitality and land totaled $366 billion. The vast majority of these commercial real estate acquisitions were financed using third party firms like banks, non-bank SBA lenders, and commercial real estate lenders.

The Five Commercial Real Estate Loan Products

There are five basic types of commercial real estate term loan products. (A term loan is a loan with a specific, fixed principal amount and a set maturity date and repayment schedule, which does not include line of credit financing (e.g., revolving construction lines)).

  • Permanent Loan
  • Mini Permanent Loan
  • 7A Loan
  • 504 Loan
  • Bridge Loan

Below is a cheat sheet on these five loan products and some fun facts about each:

1. Permanent Loan

Description:  Conventional, long-term commercial real estate financing from a bank

Eligibility Criteria:  You must be near perfect. Translation: you need to have a 700+ credit score (or a good story as to why you don’t), lots of positive net cash flow businesses and/or investment properties, high balances in your business and personal bank accounts, and the property needs to have at least 1, but ideally 2 years of positive net operating income (NOI).

Permanent Loan Pros:

    • 15 to 30 year terms
    • Prime to near-prime interest rates


Permanent Loan Cons:

    • Hard to qualify
    • 30-60 days approval time


2. Mini Permanent Loan (Mini Perm)

Description:  Conventional, short-term commercial real estate financing from a bank

Eligibility Criteria:  You pretty much need to meet all of the criteria for a permanent loan, except the target property does not have to have positive net operating income (NOI). However, your Sources and Uses statement needs to show how you will use the loan funds to make the subject property income producing (e.g., acquire property, do construction/rehab, lease up, etc.) so you can qualify for long-term financing before your Mini Perm loan matures.

Mini Perm Pros:

    • 1 to 5 year terms
    • Prime to near-prime interest rates


Mini Perm Cons:

    • Hard to qualify
    • 30-60 days approval time


3. 7A Loan

Description: Alternative funding for commercial real estate, equipment, and/or working capital from a bank or non-bank lender certified by the U.S. Small Business Administration

Eligibility Criteria:  Can only be used by eligible small businesses. If you are close, but do not yet qualify for a conventional loan from a bank you may qualify for this funding.

7A Pros:

    • Up to 25 year terms
    • 6 to 10% interest rates
    • Can also use for working capital and equipment


7A Cons:

    • Max loan amount: $5 million
    • 30-60 days approval time


4. 504 Loan

Description: Alternative funding for commercial real estate and/or heavy equipment from a bank and a non-bank lender certified by the U.S. Small Business Administration

Eligibility Criteria:  Can only be used by eligible small businesses who own or occupy 51% or more of the commercial property. If you are close, but are not yet qualified for a conventional loan from a bank you may qualify for this funding.

504 Pros:

    • 10 to 20 year terms
    • 6 to 10% interest rates
    • Can also use for working capital and equipment


504 Cons:

    • Lots of paperwork required
    • 45-90 days approval time
    • Max loan amount: $20 million


5. Bridge Loan

Description: Alternative funding for commercial real estate from a private and/or hard money lender

Eligibility Criteria:  If you don’t yet qualify for funding from a 7A or 504 lender and you have a plan to acquire and/or improve an asset that will eventually secure better funding, then you may want to try a bridge loan. However, it won’t be a cake walk, the cardinal rule still applies. You need to show you have a history of mostly paying your bills on time (minimum 620 credit score) and enough cash flow from personal and investment income to cover the property operating expenses and the debt service (principal and interest) for all existing loans that you have and the new loan you are applying for.

Bridge Loan Pros:

    • 1 to 5 year terms
    • Easier to qualify


Bridge Loan Cons:

    • 10-20% interest
    • 30-60 days approval time


There they are: the five jewels of the commercial real estate financing market. Depending on who you are, what your financial profile is, and how you plan to use the commercial real estate, one or more of these loan products will be right for you.

Now that you have a good handle on what the options are and the pros and cons of each, you should take a look at your existing commercial real estate investment portfolio and make sure you are currently getting the best possible deal with respect to interest rate and term. If you are not, you could save yourself a lot of cash by refinancing. That’s cash that could be used to reinvest in your business, buy more commercial real estate properties, or reserve for a rainy day. And for those that work with and/or support commercial real estate investors, encourage them to explore their options and evaluate the financing on their current properties and/or planned purchases. If you help save them some money today, I can assure you, that you will continue to be their go to resource for commercial real estate in the future.


Chinwe is the CEO & Co-Founder of FundWell. Chinwe has a strong personal interest and a professional track record devoted to helping organizations raise capital. She co-founded, capitalized, and operated a boutique consulting firm that over the last seven years has successfully raised a total of $120 million in grants, competitive loans, tax incentives, government subsidies, and owner equity financing on behalf of clients across the country. Chinwe’s consulting experience includes McKinsey & Company, where she provided financial and strategic business advisory services to Fortune 1000 company executives, and while at Monitor Company (now owned by Deloitte) she provided strategy and financial analysis for public and private sector clients, and managed a $3 billion dollar real estate account. Chinwe has a B.A. in Economics from Harvard College and is a Henry Crown Fellow of the Aspen Institute.


FundWell ( is an online resource that prequalifies and connects commercial real estate investors and small businesses seeking funding with a growing number of bank loans, non-bank debt funding, and other credit related financing options.

FundWell delivers a 75% loan approval rate in a marketplace where they typically face a 30% approval rate. FundWell helps commercial real estate brokers increase deal flow and speeds up closings by referring their clients to prequalified lenders that will fund their real estate needs and business expansion plans. FundWell also helps real estate brokers access financing to grow their businesses.

Since 2012, FundWell’s online financing marketplace and financial health information has reached over 24,000 small businesses, working in partnership with over 300 lending partners across the country that span 13 different types of loan products from conventional bank loans and SBA loans to factoring, equipment loans and commercial real estate loans.