LTV of 35% for a existing property. Changed from SBA 504 to conventional but banks wants and additional 25% equity.
I am in a very frustrating situation.  I am an owner occupant, who had the option to purchase the building from the purchase of the business.  I exercised this option and was doing an SBA 504 to finance.  The SBA loan process was taking forever, so the bank did a bridge loan to fund the sale until the SBA loan funded.  However,  the bridge loan was to a real estate holding company, owned by me personally.  The SBA 504 was an owner occuptant directly to business. So I have a bridge loan that has been extended 3 times and now the bank says I need an additional 25% done because credit is considering it a startup.  Shouldn’t it be a 25% LTV because it is now an investment property?  I want to refinance using a new appraisal because the option was based on a 2019 appraisal, and the building is easily worth much more.  SBA will not allow loan to structures the same way as bridge loan.
[{"id": "iv5scgg", "text": "I guess my first question here is what is the current status of the bank loan? Are you asking for another extension? Or are you in the process of underwriting completely new loan?\n\nSecond question would be to understand the annual cash flow coming from the property, and how it relates to the loan balance. Given the rise in interest rates recently, most banks have been more focused on cash flow than leverage.", "replies": [{"id": "iv5w1qt", "text": "I am extended through end of year.  If I can hold of to March 31, I could get it reappraised and possibly not need any money down?", "replies": [{"id": "iv88cl8", "text": "Maybe, but I think you\u2019re focusing too much on the appraised value here.  That\u2019s just a 3rd party suggestion of what the property could be worth. If your business is only paying a small amount of rent compared to the comparable properties in the appraisal, your cash flow may be the limiting factor. Especially if it\u2019s a start up or small business.", "replies": [], "depth": 3}], "depth": 2}, {"id": "iv5w3jr", "text": "I am underwriting a new loan", "replies": [], "depth": 2}], "depth": 1}, {"id": "iv6lh6a", "text": "Hey I\u2019m a VP at a nationwide SBA Lender. Sent you a PM. I can help you figure this out.", "replies": [], "depth": 1}, {"id": "iv6nwbp", "text": "Minor point. LTV is 65-75% \n\nSecondly, the lender is following the rules. You don\u2019t have much of a legal argument that I can see", "replies": [{"id": "iv6p4nl", "text": "Not looking for a legal argument. I am just exploring my options.  I want a new appraisal done so I don\u2019t have to put as much money up.  However,  banks usually require 1 year to have an appraisal done to refinance.  Are any bankers on this forum willing to do a refinance within 1 year and require 25% LTV of the appraised value.", "replies": [{"id": "iwhbwt2", "text": "Also its usually the lessor of purchase price or Appraised value.  So even if you get it appraised for higher it won\u2019t change the requirement based on the purchase price (for most banks)", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iv6rixk", "text": "Idk if the appraisal is going to change much within 1 year\u2026\n\nAlso how long has the business been around? Is it a mom and pop?  If it has less than 2-3 years of historical performance they would underwrite it towards the business and not the property, adding back rent expense and increasing debt service.  At that point, a 75% LTV is not really out of line with market- and might actually not be a bad deal.", "replies": [{"id": "iv6rsop", "text": "I purchased with an option to purchase from a 2019 appraisal.  I bought for $156/sq.ft but sold a similiar flex property last month for $265/sq.ft.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iv6u6h8", "text": "Just take it to another bank to refi, theyll make you get a new appraisal.\n\nOnly do that if the business can cash flow the property.", "replies": [{"id": "iv6x06g", "text": "Even if I bought it less than a year ago?", "replies": [{"id": "iv6zfzf", "text": "Depends on the date of appraisal, not the date of purchase.", "replies": [], "depth": 3}, {"id": "iv78qe7", "text": "Yes.  You don't have to offer to xfer your existing appraisal. I'd be stunned if they didn't want to order one anyways given how the lending environment has changed in the last 90-120 days.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iv78fl5", "text": "Lesser of purchase price or appraisal is your issue.\n\nIf I read this correctly you purchased the operations around 2019 and have a purchase option on the real estate you have been renting since. If you're operations have been strong before and after the purchase you can probably find a lender to do 85% with your operating entity as a guarantor. \n\nIf you don't want the guarantee then yeah you're going from the 90% the SBA would do to the 65% which is a conservative investment property level for conventional lenders. You may find a lender to go to 75% but I'm not sure from your post what you are expecting here.", "replies": [], "depth": 1}, {"id": "iv7uo1y", "text": "Get a new lender!", "replies": [], "depth": 1}, {"id": "iv817mx", "text": "Good luck. Sounds like a learning experience", "replies": [], "depth": 1}, {"id": "j1fjv7j", "text": "Hey Everyone,  I just wanted to give everyone an update and thank everyone for the advice.  I took it to a different bank and they used 15%LTV of the appraisal.  It appraised for $900,000 more than I paid.  So I was able to do a chashout refinance and payoff much higher interest debt.  Huge win and I am very happy!", "replies": [], "depth": 1}]