Boarding room/hospital loan

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boarding room/hospital
Posted by: josephine Oct 7 2003, 06:20 PM
looking for a loan for a 35 unit boarding room in good conditions in los angeles. county code use is Hosptal/Convalescent. need at least 75% ltv. perfect credit 720+ fico, stated income. i would appreciate any advice. thank you.
Posted by: loanuniverse Oct 7 2003, 10:22 PM

My experience with these types of loans is limited, I don’t remember doing a loan for an assisted living facility {ALF} ever. Fortunately, a request for an ALF landed in a coworker’s desk recently and we talked about it some. When an unusual loan request comes into our pipeline, the credit people usually discuss it in order to make sure all of our possible risks are addressed.

The first thing that come to mind after reading the information you provided is that I do not see how the loan will be repaid. You need to understand where I am coming from, I am a bank analyst. Banks are not collateral lenders, our loans must show that the capability to repay is there. I am not saying that obtaining the loan is impossible, it just means that a commercial bank could not support its decision. Being that our loans are subject to examinations for safety and soundness by federal regulators, not supporting lending decisions is not permitted. By the way, the perfect credit is more important for consumer credit, the benefit is minimal for commercial credits. At the same time, a bad credit might not necessarily preclude you from a commercial loan as long as everything else works out.

What I can offer at the moment is not an answer, but I can give you a list of the questions that will probably creep up during the process.

1- Is the building empty? Is it an operating building?

2- What plans do you have in mind for it?

3- If you are thinking of running an ALF or a similar type of business, do you have experience?

4- Do you have the required licenses or certifications needed in your locale to run this? If not, can you get them? How long will it take?

5- Is there a business plan for this? Are you accounting for the slow paying Medicare program? Cash-flow is always a problem when dealing with healthcare.

6- Are you buying an ongoing operation? Can you get financial statements?

7- How are you going to finance the 25% equity contribution?

8- How are you going to pay the loan back?

These are just preliminary questions that would be answered already by the time I receive the package for credit analysis. Well to be completely honest, these questions [color=red]should have been answered[/b] by the time the loan gets to the credit department, but sometimes the preparation work done by the lending officer is lacking. Once I get the financial information along with the required background information, my job is to make sure that everything makes sense and in order to do that a follow-up set of questions might be created.

I know this is not exactly what you were looking for, but I hope it helps.
Posted by: josephine Oct 9 2003, 02:07 PM
the building is apparently flly occupied and produced 183k a year. thank you
Author: Commercial Loan Underwriter