Mercantile Commercial Capital Loan Comparison:
Mercantile Commercial Capital"s SBA 504 Loans vs. Ordinary Loans
Small business owners put less money down and minimize their cash flow considerations with MCC, making owning real estate an option for many business owners that might otherwise not have the opportunity. Business owners can use their excess capital and increased cash flow to concentrate on growing their business instead of putting it into their real estate (a non-income-producing asset), while at the same time get the benefits of owning instead of leasing.
Our 504 loans provide 90% loan-to-cost financing for commercial real estate with low monthly payments at below market, long-term fixed interest rates and in the process, create new jobs for the community with our clients' "equity savings."
The following is a detailed comparison of the financing variables typically available to most owners of small to mid-sized businesses wanting to acquire/construct owner-occupied commercial real estate.
|
|
Ordinary Bank Loan |
Mercantile Commercial Capital (504 Loan Program) |
|
Loan Amount |
75% to 80% of the lesser of appraised value or purchase price. |
90% loan-to-cost (90% financing of total project costs, inclusive of soft costs, closing costs, |
|
Equity |
20 to 25% plus closing and soft costs. |
10% of the total project costs. |
|
Term |
Frequently 5, 7, 10 or 15 years, then balloons. |
1st Mortgage : 20 or 25 years. 2nd Mortgage : 20 years. 23 years blended with no balloons. |
|
Amortization |
15 or 20 years. |
1st Mortgage: 20 or 25 years. 2nd Mortgage: 20 years. 23 years blended and fully amortizing. |
|
Pricing |
Competitive fixed or variable rates.
Usually not assumable. |
1st Mortgage: Competitive fixed or variable rates.
2nd Mortgage: Least expensive financing available to most small business owners for commercial real estate. Usually 0.5 to 0.75% less than competitive rates and The blended, effective rate of our 1st and 2nd mortgages is nearly always lower than ordinary financing and is fixed for a longer period
Both loans are assumable. |
|
Personal Guarantees |
Frequently has them.
|
Has them, but for strong credits, can be limited to pro rata ownership. |
|
Prepayment Penalty |
Sometimes has them, but frequently not. |
Flexible and negotiable. Can pre-pay up to 20% of principal balance for first ten years with no prepayment penalty. MCC |
|
Debt Service Coverage (DSC) |
Usually 1.2x or higher. |
At least 1.0x. |
|
Fees |
Usually 0.5% to 1% of loan amount. |
Usually 1.5% of 1st mortgage and 1% of 2nd mortgage. Blends to 1.27%, but is negotiable for strong credits. |
|
Personal Credit Scores |
Usually no less than 650. |
Usually no less than 600. |
|
Application Process
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Extensive, time consuming and a long waiting period just to get approved.
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Hassle-free and streamlined with fast decisions.
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"This is a once-in-a-generation opportunity to lock in rates on a 20-year 504 loan at somewhere around 6 [percent]," says Jim Hammersley, Director of Loan Programs for the SBA, "With rates as low as they are, more people should be taking advantage of that."
