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new resort lending


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#1 HEI7438

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Posted 14 January 2012 - 11:50 PM

We are interested in creating a new modern vacation resort. We hope to begin construction in April 2012. A construction step by step of release of funds is planned. Based on the completion of (8 cabin units) all work is expected to be finished in March 2013.

The total land purchase for the resort ($450,000)
Site development fund: including architect, legal and zoning ($150,000)
Multiple Cabin purchase (8 units): installed and functional (800,000)
Total construction phase of loan = $1,400,00 ** each cabin is expected to appraise for $300,000

The start of business will be early May 2013. The rates will be: ($250 per day) or ($1,500 per week) for each cabin. Two day min.
Summer Business Gross (5 months) - $2,000 per day = $12,000 per week @ weekly rate = $48,000 per month (conservative) = $240,000 summer season total (conservative)

(4 month) Winter Business Gross - $2,400per day = $4,800 per weekend with turnover every two days = $19,200 per month = $76,800 winter season total (conservative)

$14,000 Christmas-New year week (holiday gross)

Yearly business gross = $330,800 (conservative est.)

Question #1: Considering we are a start-up business, will our S-corp business identity allow us to make our first loan payment after our first profit month in business.?

Question#2: Can our final business loan be created as a line-of-credit. We can then increase our funding line to $1,700,00. The remaining available $300,000 (after the construction payoff) will be used for marketing and emergency purchases.?

#2 loanuniverse

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Posted 20 January 2012 - 08:10 PM

Question #1: Considering we are a start-up business, will our S-corp business identity allow us to make our first loan payment after our first profit month in business.?
Yes this structure is possible. A lot of construction loans have a built-in "stabilization" period for leasing purposes. In your case, something like that could be arranged.

Question#2: Can our final business loan be created as a line-of-credit. We can then increase our funding line to $1,700,00. The remaining available $300,000 (after the construction payoff) will be used for marketing and emergency purchases.?
This would be a little more complicated to structure and I would suspect not many lenders would like to do this. Maybe setting it up as a secondary facility would be possible.

What you did not ask, but should know:

- You summarized total costs of $1,400M, but at the same time you are looking for financing in the same amount. Well, that is just not going to happen. You are pretty much asking the lender to take the position of an investor without the upside.

- As a lender, I would like to see your equity in first before I disburse a cent. For this type of project 35% equity sounds reasonable. This is based on cost not what you expect the loan-to-value to be at completion. Do not get me wrong the loan-to-value as completed should not exceed 65% either, but the cushion needs to be present at all stages of the project.

- I would also have to be comfortable with whomever is going to be the general contractor doing the work and make sure he is bonded. I would also have to be comfortable that you have the ability to run this type of business once it is ready to go.


Hope this helps





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