CONSTRUCTION & BUSINESS LOANS
Whether you’re looking to develop your first construction site or own a business that needs some considerable remodeling, you’re probably going to need a loan. In order to choose the one that fits your needs, you’ll need to figure out which one is best for you. Upon making that decision you’ll need a completed Business Plan, Executive Summary some pretty deep resources and trustworthy connections in order to get the right loan for the right terms that fit your specific needs…and that’s were our team at FOND can help.
FOND has extensive knowledge of what lenders today are looking for in completed project due diligence as well as our mass of worldwide lending connections allow us to physically hand or transmit your finalized application form to a lender who understands exactly what your goal is and is ready and willing to fund that goal on you or your company’s behalf.
FOND brokers non-conforming loans from hundreds of thousands to millions of dollars in markets nationwide. FOND functions as a preferred origination point for a large group of banks, institutional lenders, investment funds and private finance companies. In states where FOND is not a commercial mortgage lender or commercial mortgage broker, FOND acts strictly as a loan packager for, or a referral source to, those entities licensed to lend on commercial real estate.
COMMON LOAN TYPES
To help you navigate the process, here are seven common types of loans and what they cover.
- Conventional Loans – Conventional loans are mortgage loans from mortgage lending institutions not backed by an agency of the government such as the U.S. Department of Veterans Affairs or the Federal Housing Administration. Conventional loans can be either conforming or non-conforming.
- Conforming Loans – A conforming loan conforms to the guidelines set by Fannie Mae and Freddie Mac. The main guideline is the maximum loan amount. This amount can vary depending on the home’s location—for example, a house in a high-income area can be eligible for a larger loan than one in a general income area.
- Non-Conforming Loans – Non-conforming loans do not conform to the qualifications and guidelines set by Fannie Mae and Freddie Mac corporations. If you require a loan larger than a conforming loan, you will be looking at non-conforming loans, such as jumbo loans.
- Secured Loans – With a secured or collateral loan, you leverage personal property to obtain the loan. If you default, the property is transferred to the lender. The interest rate and loan amount can vary depending on the value of the property you leverage. Generally, higher value property can get you a larger loan and possibly a better interest rate, although other factors—such as loan length and credit history—will also be taken into consideration. Common examples of personal property used to secure a loan include these possessions – Houses, Property, Vehicles, Savings Accounts and CDs
- Unsecured Loans – Unsecured loans are not backed by collateral, so the interest rate and size of the loan is determined by your credit history and income. Unsecured loans are also known as personal or signature loans. If you have a good income, good credit and a solid payback plan, these can be a good option.
- Open-ended Loans – Open-ended loans are loans with a fixed-limit line of credit that can be borrowed from again after they have been repaid. Credit cards are one type of open-ended loan. A home equity line of credit, or HELOC, is another. HELOCs work like this: The lender approves you for a certain amount of credit based on a percentage of your home’s appraised value, minus the balance owed on your mortgage. The sum acts as a credit line you can borrow from, pay back and borrow from again. Homeowners renovating their home may want to consider this option to fund the project.
- Close-ended Loans – Closed-ended loans are loans that cannot be borrowed from again, like student loans, mortgages and car loans. The loan decreases with each payment. If you want more credit, you have to apply for a new loan. If you need a set amount of money and nothing more, this is a common way of doing so.
COMMON LOAN DEFINITIONS
- Recourse Loan – Recourse debt is a debt that is backed by collateral from the borrower. Also known as a recourse loan, this type of debt allows the lender to collect from the debtor and the debtor’s assets in the case of default as opposed to foreclosing on a particular property or asset as with a home loan or auto loan.
- Non Recourse Loan – A non-recourse debt is a type of loan that is secured by collateral, which is usually property. If the borrower defaults, the issuer can seize the collateral, but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount.
- Collateralized Loan – Collateralized loan obligations (CLOs) are a form of securitization where payments from multiple middle sized and large business loans are pooled together and passed on to different classes of owners in various tranches. A CLO is a type of collateralized debt obligation.
- Construction Loan – A Construction Loan is any value added loan where the proceeds are used to finance construction of some kind.
LENDING TERMS AND DEFINITIONS
Acceleration: Demand for immediate repayment of the entire unpaid balance of the loan.
Accrued Interest: Amount of interest that has accumulated on a loan.
Borrower: Person responsible for repaying a loan that has signed and agreed to the terms of the promissory note.
Capitalized Interest: Unpaid accumulated interest added to the loan principal. Capitalizing interest increases the principal amount of the loan and, therefore, the total cost of the loan.
Consolidation: The process of combining one or more federal loans into a single new loan.
Default: Failure to repay a loan in accordance with the terms of the promissory note.
Deferment: The temporary postponement of loan payments.
Delinquency: This occurs when payments are late or missed, as specified in the terms of the promissory note and the selected repayment plan.
Disbursement: When the school pays loan proceeds to the student or the parent borrower, or posts the funds to the student’s account.
Discharge (Cancellation): The release of a borrower from their obligation to repay their loans. A borrower must meet certain requirements to be eligible for discharge.
Disclosure Statement: Statement of the actual cost of the loan, including the interest costs and the loan fee.
Endorser: An endorser is someone who does not have an adverse credit history and agrees to repay the loan if the borrower does not repay it.
Entrance Counseling: A mandatory information session which takes place before you receive your first federal student loan that explains your responsibilities
Exit Counseling: A mandatory information session which takes place when you graduate or attend school less than half-time that explains your loan repayment responsibilities and when repayment begins.
Federal Direct Loan Program: The William D. Ford Federal Direct Loan Program, referred to as Direct Loan Program, is a federal program that provides loans to student and parent borrowers directly through the U.S. Department of Education. The Federal Direct loan program includes the Direct Susbidized Loan, Direct Unsubsidized Loan, Direct PLUS Loan, and Direct Consolidation Loan.
Forbearance: An arrangement to postpone or reduce a borrower’s monthly payment amount for a limited or specified period, or to extend the repayment period. The borrower is charged interest during forbearance.
Grace Period: A specified period of time before the first payment must be made on a loan. Typically, the grace period starts the day after a borrower ceases to be enrolled at least half time.
Interest: A loan expense charged by the lender and paid by the borrower for the use of borrowed money. The expense is calculated as a percentage of the principal amount (loan amount) borrowed.
Loan: Money that must be repaid.
Loan Fee: An expense of borrowing deducted proportionately from each loan disbursement.
Loan Principal: The sum of money borrowed.
Master Promissory Note (MPN): The Master Promissory Note (MPN) is a promissory note that can be used to make one or more loans for one or more academic years (up to 10 years).
National Student Loan Data System (NSLDS): A centralized database, available at www.nslds.ed.gov, which stores information on federal grants and loans. NSLDS contains information on how much aid you’ve received, your enrollment status, and your loan servicer(s).
Prepayment: Any amount paid on a loan by the borrower before it is required to be paid under the terms of the promissory note.
Promissory Note: A legally binding contract between a lender and a borrower. The promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid.
Rehabilitation: A program that enables defaulted borrowers of federal Perkins loans to bring their accounts current, to remove previously reported derogatory credit information, and to reinstate the remaining balance of privileges and benefits of the loan. Borrowers must request rehabilitation from their lender in writing. Additional information and/or rehabilitation agreements can be obtained from the Loan Office.
Servicer: A company that collects payments on a loan, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a loan on behalf of a lender.