Many good quality, single tenant, net leased properties qualify for both credit tenant lease (CTL) financing and conventional commercial mortgage lending. Net lease property investors should consider the pros and cons of each before deciding which type of loan to commit to.CTL lending is generally best for the long term income investor who wants permanent, high leverage, fixed rate, fully amortized financing and desires speed and certainty of execution. Bank lending has a lower initial (but not overall) cost and can offer a larger variety of terms and conditions. Banks are best for investors who need options, don’t need maximum leverage (have large down-payment available), and who are not sure if they will hold a property for the long run.The DifferenceCTL lending combines aspects of commercial mortgage lending with specialized investment banking in-order-to close deals. A CTL banker issues and sells private placement corporate bonds that are secured by the lease on the real estate. The proceeds of the bond sales are used to fund a commercial mortgage loan for the borrower. The loan is administered by a third party Trustee throughout the life of the deal.Traditional commercial mortgages are standard loans secured by mortgage liens against the real estate, the income the property produces and the credit of the borrower. Banking institutions originate a loan and fund the deal either by selling the loan to an investor (private or Government) or by lending its own funds and holding the loan in its portfolio.LeverageThe ongoing credit crunch has forced banks to tighten up their lending criteria. It is highly unlikely that a commercial bank will offer any more than 75% loan-to-value (LTV) on any deal today. Banks have no incentive to take unnecessary risk; they can borrow money from the Fed (Federal Reserve Bank) at 0% percent and buy 10 year Treasury Bonds at 2% earning 2 points risk free. They will pass on high leverage loans and only lend where they have large amounts of protective equity.CTL lenders will lend up to 100% LTV (lease fee valuation) on a non-recourse basis. They are in the business of loaning the full, current cash value of a lease (against the guaranteed future income). CTL bankers, without question, make the highest loan offers in the commercial real estate finance industry.Speed and Certainty of ExecutionCTL loans can close in about 1/3rd of the time it takes to close a conventional commercial mortgage. CTL deals have been known to be completed, from-start-to-finish, in as-little-as 45 days (unheard of in the world of commercial banking) but generally take 60.Bank loans take at least 60 days, sometimes 180 or more. Also, because CTL deals either qualify or doesn’t, a banker can give a borrower a solid yes or no very quickly. There are a thousand ways a bank loan can fall through but, once a CTL banker commits to a deal and a borrower signs off, there is a near 100% certainty of execution.RecourseCTL loans are all non-recourse loans secured by the income that the lease produces.Bank loans are usually, though not always, standard, credit driven, full recourse loans with liens against the borrower as well as the real estate.CostA CTL loan will have higher initial costs because of the investment banking aspect to the deal and the fact that a third party Trustee must be involved. However, over the life cycle of a property, CTL tends to be less expensive because you never have to refinance. At the end of a CTL loan the borrower owns the property free and clear.Bank loans must be recapitalized or paid off at the end of each term, usually 3, 5, 7 or 10 years. Having to refinance so often results in higher overall cost of capital.FlexibilityCTL lending is somewhat less flexible than standard bank lending. The bonds sold by CTL bankers are regulated by the securities industries and the insurance industries. CTL lenders must adhere to very strict criteria and are not allowed to deviate from the standards. A deal qualifies for CTL or it does not; there is no leeway.Banks generally have many lending platforms available to them; they are able to tailor a loan to a particular situation or a particular property.TermsBanks can offer self amortizing loans but generally issue mortgages with 3,5,7 or 10 year maturities amortized over 10-25 years with balloon payments due at the end of each term. Banks can also offer either fixed or adjustable rates.CTL loans are all fully amortized, fixed rate, long term loans with terms coterminous with the lease.In SummaryBanks offer a larger variety of loan products and can loan against more types of properties and tenants. Bank lending also tends to be less expensive in the short-run.On the downside, banks are not inclined to offer high LTV loans and will generally require the borrower to guarantee a loan. Further, bank loans are notorious for falling through and failing to close for any number or reasons (or no reason at-all).CTL loans are rigid in their qualification standards but close with near 100% certainty. They close faster and are less expensive over the life of a deal. CTL bankers place no restrictions on LTV or LTC (loan-to-cost) and are non-recourse loans. Also, it must be noted that CTL loans are administered by a third party Trustee throughout the entire life of a loan. The trustee will collect the rent, pay the mortgage and distribute the income to the borrower every month.CTL loans are best for buy and hold investors who want to lock in today’s low rate for the long term. They are also appropriate for investors who need high leverage financing or who are looking to close as-soon-as-possible.Bank loans are best for investors with deals that need some flexibility in the underwriting process. Bank loans will cost less up-front and more deals will qualify. Banks offer more loan choices to qualified borrowers.Single tenant, net lease real estate investors who understand their options will be well equipped to make the best financing decisions for themselves and their businesses.
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SRED Credits – How to Finance Your Claim For Immediate Cash Flow
Canadian business owners and financial manager who file for SRED credits are often not aware that these claims can be financed in order to generate working capital and cash flow out of the claim. They are even more surprised to hear that it is actually possible under most conditions to obtain financing even prior to financing the claim.What could be a better working capital and cash flow strategy than getting immediate cash flow for a government grant that is non repayable? We frankly can think of no other risk free way to bring valuable cash funds into your company if you are utilizing this great government programme.Let’s establish some bedrock around what we are talking about. The programmes formal name of course is the Scientific Research and Experimental Development aka ‘(SR&ED) ‘program that is funded by the federal and provincial governments. Each SRED claim has a federal and provincial portion, and, combined, they provided you with a non- repayable tax credit for a significant amount of the funds you spend on qualifying R&D and business processes.Many clients we work with have their claims prepared on a contingency basis – that simply is letting someone else, known as a SRED consultant, prepare you claim and letting them absorb all ( yes all ) of the cost of that claim. When you finance a SRED claim you can actually arrange to have the SRED consultant paid at the same time also.SRED claims continue to be on the rise in Canada, and when you couple the filing of those claims with a somewhat challenging financial environment for business financing you have a perfect storm, so to speak, for the consideration of financing your claim.The financing of SRED claims is the ultimate ’boutique ‘financing business in Canada. We urge clients to work with a business financing advisor who can ensure they are receivable maximum funds and market rates, terms and structures for the amount of the claim.Clients want to know how ‘complex ‘a SRED financing is. The reality is that you should view a SRED tax credit financing in exactly the same manner as any business financing, other than to understand perhaps that the main collateral on the SRED loan is really the claim itself. We use the word ‘SRED loan ‘but in reality the SRED financing brings no debt to the balance sheet – you are simply monetizing your claim for cash flow and working capital now.The essence of the entire process can be simply described under the following process- SRED financing application- due diligence- legal/documentation- Funding!!It’s as simple as that, and we advise most clients the entire process can be completed within a few weeks, which is standard for most business financings anyways.You would only want to consider SRED financing if in fact you don’t want to way from 1-12 months, (sometimes longer) for your grant cheque from the government. As a Canadian business that is growing you probably have much better uses of those funds now, including reducing payables, investing in even more r&d, acquiring new business assets, etc.Consider SRED tax credit financing as one more toolkits you have in your overall business strategy. Work with an expert and maximize the amount of your return and the overall most effective use of that essentially free cash flow and working capital.
A Guide to Help You Pick the Best Air Purifier for Your Loved Ones
Holidays are around the corner. This is the time of year when people start purchasing gifts for their loved ones. If you are going to purchase an air purifier for someone you love, we have some helpful tips for you. If you want to purchase the best unit, you may be able to use this guide to your advantage. Read on to find out more.
1: Set Your Budget
Just like anything you purchase, make sure you have set your budget first. The price of the unit will vary based on a lot of factors, such as the capacity, filter type, features, and brand of the unit. If you don’t have a flexible budget, we suggest that you go for a product that is available to purchase for less than $300.
2: Consider the Needs of the Recipient
Your next move is to consider the needs of your recipient. If you are going to purchase this unit for everyday use, we suggest that you go for a unit that comes with a HEPA filter. On the other hand, if your loved one has a specific need, we suggest that you consider a specialized unit.
For example, if they are more prone to respiratory issues, such as allergies and infections, we suggest that you get a UV purifier for them. The devices are designed to neutralize viruses and bacteria.
3: Think About the Available Space
Another primary factor is to consider the available space in the office or house of the recipient. For example, if they need a general-purpose unit for a small apartment, you may want to consider a filterless unit.
On the other hand, if they have plenty of free space, you may consider a bigger unit that features a higher airflow rating. These units are powerful enough to cover a large face.
4: Consider Extra Features
Lastly, we suggest that you consider additional features that they will just love. For example, some units come with an indicator that turns on when the filter needs to be replaced. This will allow the user to change the filter so that the device continues to work properly.
So, you may want to consider these features before you place your order. These features may not be important to you, but your friend may just be over the moon.
Long story short, we suggest that you consider these four tips if you are going to purchase a gift for your loved one on these holidays. Since the air is full of pollution during winter days, nothing can make a better gift than an air purifier. Therefore, you should consider these tips before looking for an online or physical store to make your purchase decision.