How CRE and Business Buyers Can Still Get Favorable Financing in a Tight Credit Environment

Much is being said and written about banks' liquidity problems curbing the purchase and sale of commercial real estate properties and businesses today.  But, there is a solution for the right situation.

It's called the 453 Commercial Loan, a licensed, patent-pending program offered through participating lending institutions, and every bank and insurance company is eligible to participate, if they desire.

It leverages the use of an installment sale, whereby a seller receives payments at interest over time instead of a lump sum at closing.  However, with this program, the lender becomes the payer to the seller prospectively, not the buyer.  This enables several advantages that benefit all the parties.

First, the lender is able to delay disbursement of an amount of the loan proceeds equal to what the seller is willing to receive over time.  This gives the lender two beneficial options: (1) it can choose not to fund that portion of the loan at closing, thus relieving some of its liquidity pressures; or (2) it can choose to fully fund the loan, but reinvest those proceeds in the interim for considerable additional revenue, enabling it to "spend" that revenue, in part, to improve the lending rate for the buyer and/or the payment crediting rate for the seller.

Second, the seller is able to defer the payment of gain taxes until each payment is received, earning interest on those unpaid taxes in the interim.  And, while the seller becomes an unsecured creditor of the bank in this structure, sellers are generally much more comfortable with that credit risk than they would be with the buyer, and thus willing to forego retaining title as collateral.

Thus, the seller is able tosell the asset and leverage the tax benefits of an installment sale.  The buyer is able to get financing on favorable terms and get title at closing.  And, the lender is able to make a loan subject to its normal underwriting and either reduce its liquidity requirements or earn additional revenue.  All parties win.

For more information, call me (Bruce Gordon) at (913) 685-0755.