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What are my options w/ Bad Credit & a Dream? - LoanUniverse Community

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What are my options w/ Bad Credit & a Dream?

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#1 Michelle

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Posted 07 October 2004 - 05:31 PM

There is a commercial property in my home town that has been empty for many years. It is in an revitalization area of the city. It has great potential because of its location and the city 's Urban Master Plan to build the area up.

The building is structurally sound but needs electrical, plumbing, etc. updates. I would like to have a supper club with potential of renting part of it to a bakery and other small business (it is a two story building- approx 10-15,000.sq ft).

My delimma is, my credit score is about 580. I have about 15M to put down from my 401K. As lenders, what are my option if any, in lending to either lease/purchase, buy, or lease. The owner is very flexible in either leasing parts of the building, leasing to own, or selling- but does not want to fix the building up. I am aware that I can share the cost of improvements I make if the owner agrees.

I want to own the building and be a part of the growth of my city. I have the drive to make it work. Unfortunately, I don't have the credit right now to match.

Could any or all of you offer some suggestions?

Thanks so much for your time!!!

#2 loanuniverse


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Posted 07 October 2004 - 07:59 PM


I analyze risk for a living, and as such my feedback might be seen as sometimes being too negative. Before I get to what I would do if I was in your place let me go over some problems that I see {maybe you thought about it or maybe you havenít}

1- I do not know what exactly is that you want to do. Are you interested in buying a building or running a business.

2- There is a reason why the building is vacant. Potential sounds nice, but nobody lends on potential.

3- I do not know the amount of money that this project will take, but chances are that you are undercapitalized. This is a bigger obstacle than your credit history.

4- 580 credit score is clearly inadequate. A commercial lender can look to mitigate this with letters from you explaining why you might have derogatory items in the credit report. However, your request would have to be strong in other areas.

5- It is nice that you have drive, but do you have a plan?

What I would do:

1- First thing is to prepare a business plan.

2- I would concentrate on the business portion not so much the property.

3- The owner of the property is willing to bend so negotiate a favorable lease with option to purchase.

4- Having the owner help with leasehold improvements is a big plus.

5- You will likely need additional capital. Start thinking where to get it from.

6- A startup like this will need some kind of guarantee from someone to make sense to a lender {think SBA}

7- Get detailed advice from knowledgeable people {My answer is too general to do any good other that to point you in a direction} I am talking about a lot of work here from someone that knows numbers.

Good luck.

#3 Commercial Lender

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Posted 09 October 2004 - 10:38 PM

Congrats on the drive (motivation is a valuable asset) and on recognizing the potential in your part of town. Let me first tell you that if your area is experiencing growth, there will be other properties and opportunities and even if you miss out on this one, u need not fret, you will find something else and perhaps be better equipped.

The first order of the day should be to analyze why your credit is bad. You cannot fix it in a day but can see what is bringing your score down. Start fixing that first. As the admin said, no one lends on potential and I hate to hand over a summary opinion but credit aside, you will need to have someone (I recommend a lender) do the numbers and look at the peripherals i.e. the location (national lenders are well aware of where growth is occurring) and calculate the debt service etc to determine purchase/financing feasibility etc. I would also recommend that you get a good idea of exactly how much the electrical and plumbing would cost.

You credit is an issue but not that bad of an issue. You have a 580 which is 20 points away from B credit and 60 points away from A- Credit. So you can get a loan, but how much of a loan or the LTV (amount of loan based on the lower of purchase price or assessed value) will be lower than the norm and the rates a little high. Again how much you are willing or can put down will also be a determining factor. Hope this helped!

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