I have a client who wants to refinance to a fixed rate commercial loan. He has a nursery that shows a loss for the last two years and doesn't take a draw (no personal income). The property is worth $700K and the financing would be for $300K. He is also sitting on $700K in liquid assets. The client has a credit score of 780.
This sounds like a hard money problem to me but he apparently already has a low adjustable rate loan (around 6%). I suspect his original financing was residential.

Anyone know a lender who can do this or want to co-broker it.

Tim Lawless
Unionwide Financial Services
info@unionwide.com

I think you will hard pressed to find a lender that will lend on a nursery when there is negative cash flow. I know of no one who will consider it. A nursery is essentially raw land. The exception to this would be if there is a permanent structure that would appraise high enough to make the LTV 65-70% without any more than 25% of value considered for the land. (even 25% may be a bit high)

You are right though, this is a collateral/credit deal only. As such you will not see fixed rates much less than maybe 9.00% for this type of property. For the liquid assets to be considered they would have to be fully assigned to the lender as opposed to just pledged. This would also depend heavily on exactly what form the liquid assets take. I think the asset pledge is the only way you will get approved for rates that will be attractive considering his current rate.

A few things to check:

Have you added back into his cash flow, depreciation, net operating loss carryover, large one time non-capital expenses?

How is the cash flow year over year? Has it improved? How close is he to break even? If there is a pattern of increasing profitability and he has a demonstrable business plan to return to profitability, you may be able to talk a local bank into it. I would try one ofthe small to mid size banks in your area. His saving grace is the low LTV and the assets but be prepared to assign them and move them (if possible) to the bank. With a viable turnaround plan you may have a chance with the local banks for a decent rate.

If losses translate to negative cash flow or insufficient cash flow after you do the adjustments that CLO suggested, I would have to agree that this would be very difficult. I also see the liquid assets as a saving grace. If possible think cash collateral with an assignment or hypothecation of that money.

Other than that, think global cash flow or go with someone that looks at this as a collateral loan.