I own a small broker company in Utah. we have a borrower who has made an offer on a lot that is for commercial development. I have sent it to our usual commerical lender Wells Fargo & they do not do lot loans. Any suggestions? Thanks Wendy

Local banks are usually the players in commercial lot loans. Expect 50-60% LTV max. If the lot to be acquired is to be developed fairly quickly, you may have some other options depending on the type of development and the dollar amount.

I know you want to earn a commission but keeping your customer may, in the long run, be more profitable. Buying land without an immediate development plan is the highest form of risk....and borrowing to buy land without an immediate development plan is foolish. That said, there can be circumstances where you can make some money. But if you don't have a line of lenders waiting to make this loan there is a reason. I would suggest an alternate plan for your client. Take an option to purchase...pay the seller about the cost of the real estate taxes for a one year option at a fixed price. Get a right to extend to a second year with another option payment of taxes and agree to 'buffer' or raise the price of the land by the cost you would have paid for interest on the loan. Market the pants off the land for a sale or develoment deal and be prepared to close when your deal is approved and you are ready to build. After 24 months, bail out. As a buyer of land or a seller of land, I would do this all day long.

If it is property that your client is going to occupy, I am partnered with a great SBA lender. Is the client just wanting to buy the property and hold onto it? If that is the case, I have been searching for good land lot loans and there so far have been none. If they are going to occupy, then SBA would be the way to go. Can you give more information of the type of business?

Smaller local banks are best for lot loans. Typically these loans run 12-18 months with a possible 6 month extension. LTV generally is in the 50%-65% range. These loans are interest only with no pre-payment penalty. Some lenders will go 3 to 5 years but they are few and far between and I don't know of any in Utah because that is not my focus. A lot loan does not qualify for SBA financing. However, if the borrower is planning to purchase a lot and begin construction on an owner occupied property within days of closing, it is possible to finance the land and construction through the SBA.

The SBA does not finance investments in real estate. You have to use the property for your business in order to get financing.