Tag Archives: lending

Georgia Department of Banking and Finance Takes Action Against Two Mortgage Originators

The Georgia Department of Banking and Finance issued a cease-and-desist order to mortgage lender Yale Mortgage Funding LLC for allegedly engaging in mortgage lending activities without a license.

Additionally, the Department reported that ESS Solutions acquired City Mortgage in April 2014 and changed its name to i3 Lending. The Department did not approve the use of a trade name for City Mortgage and therefore, cited it with operating without a mortgage origination license.

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Impact of Dodd-Frank Mortgage Act for Prospective Home Buyers

 

 

Dodd-Frank Mortgage Reform will come into effect in January 2014.  What will this mean?

 

First, lenders will look more closely at the income and assets of prospective buyers to ensure that they will be able to pay the monthly mortgage payments.

 

Lenders will document and disclose every possible related homeowner costs that borrowers must pay such as property tax, homeowner association fees and homeowners insurance.  Borrowers must demonstrate that they can cover all these fees.

 

Borrowers must prove that they have a stable job. Those who are self employed will be required to show at least a two year track record of income along with two years of federal tax statements.

 

Lenders must take into consideration other mortgage payments borrowers may have. Borrowers must disclose all properties they own.

 

Lenders must consider child support and alimony in the calculation of the ability of borrowers to pay.

 

The debt to income ratio must be less than 38%.  To calculate the debt to income ratio, divide your monthly debt repayments by your gross monthly income (before taxes), and multiply that number by 100.

 

Of course, borrowers must have a clean credit history and clean credit score.

 

For additional information, please consult with your lender and attorney.

 

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We close real estate transactions

We are experienced real estate closers.  We have been closing deals since 1994.  Buyers, sellers, lenders, brokers and agents rely on out expertise. Please contact us when you are involved in a purchase ,sale or refinance.  

 

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5 Findings about the State of Small Business

I found this study to be very interesting, and I wanted to share some of its findings with you.

Key findings of The Pepperdine Private Capital Markets Project State of Small Business Report (Fall 2011), hereinafter “Report” are:

  1. Overall business conditions are declining and not expected to improve.
  2. There is an aspiration to hire.
  3. Economic uncertainty is the biggest impediment to growth.
  4. Improving access to capital will help create jobs.
  5. Businesses looking to hire believe they will need to train new hires.

Of the 10,637* privately- held businesses responding to the survey upon which the Report is based, close to 91%  report having enthusiasm to “execute growth strategies” but only 49% report having the financial resources to successfully execute the strategies.

Close to 35% of the respondents tried to obtain outside funding in the last 12 months.  Approximately 54% reported seeking bank loans or credit card financing, followed by friends and family (16%). Of all financing options, bank loans were reported to be the source of financing described in the Report as having the highest “willingness” for small businesses to use (72%), followed by angel financing (35%) and asset based lending (33%).  Nevertheless, the Report indicates that of 2,595 small businesses that tried to obtain a bank loan in the last 12 months, only 50% were successful.

*24% involved in customer goods and services, 21% in manufacturing, construction and engineering and 17% in wholesale and distribution.

Which of these 5 findings affects you the most?

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Asset Based Loans & Legal Representation

Asset-Based Loans

Asset Based Loans (ABL) is a form of lending where the borrower/company uses its assets, usually working capital assets, account receivables and inventory to support the loan request.

The company continues to own the assets because the company has pledged the assets to the lender to support the loan.  If there is a default on paying the loan, the lender can seize the assets.

The interest rate and fees on ABL are typically higher than traditional bank loans for the lower middle market borrower.  Lenders make lending decisions based on a review of the asset quality, the financial records and the length of time the company has been in business. The lender may seek a personal guarantee.

When accounts receivable serve as collateral to secure the loan, the company may get roughly 75 percent of the face value of new invoices. The loan-to-value ratio drops rapidly for older accounts.

When inventory is the collateral for ABL, the lender will usually advance a lower percentage against the “eligible” collateral and will generally exclude work-in-process as an eligible category to lend against.  Advance rates can range from 25-80% depending on the actual type of inventory being financed.

Factoring

For fast-growth companies unable to afford to finance long working capital cycles or credit losses, factoring is a way to obtain cash quickly.

In contrast to accounts receivable financing, factoring means the company actually sells the accounts receivable to a factoring company for cash. The factor assumes the credit risk for the outstanding invoices. The company may get 80-90 percent of its invoices face value up front.

Once the factor collects, the company receives the remainder less the fees and interest rates.  The cost may be as high as 20 percent annually.

Given the nature of its reliance on asset-intensive businesses, ABL tends to work best in industries with a large amount of accounts receivables and inventory. These include wholesalers, retailers, rental companies, oil and gas, automotive and durable goods manufacturers.

Legal Representation

Commercial and asset-based lending representation requires legal knowledge and specialized expertise encompassing aspects of perfecting and enforcing security interests in real and personal property, as well as related bankruptcy, tax and environmental law.

Our firm has extensive experience in structuring ABL transactions along with perfecting security interests, working out and restructuring problem loans and enforcing creditor’s rights.  We work with lenders across a broad spectrum of businesses, and understand the various issues that arise for the lender in documenting and closing a secured transaction.

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