State of the Lending Market

Market Condition Report


We, at Sierra Commercial Capital, are still actively funding deals however, due to the effects of the coronavirus outbreak, we’re primarily funding deals for essential businesses at this time.  Many funders we work with have hit the pause button until stay-at-home restrictions are lifted.  The markets are very fluid, changing daily/hourly since mid-March.

These are tough times, but from this will come innovation.  We are here to help and want to see your business succeed.  We are not participants in the SBA Disaster Loan programs – but we have seen businesses struggle to find lenders when their bank is not participating so we have created a link with alternative lender resources for businesses in California.

As for other funding options – below is a snapshot of a few trends we are currently seeing.


Equipment is Still being Funded

Cash is King – so hold on to your cash if you need new equipment for deliveries, manufacturing, constructions and other industries that are seeing a workload increase.  SECURED – Equipment with Transaction Sizes Range ($25,000 – $500,000), 3+ Years Time in Business, Up to 60 Month Term, Up to 75% LTV on Hard Assets for industries that are not heavily impacted by current economic conditions.

Examples of Industries that are currently NOT being funded:  Cafeterias Dental, Events, Fitness Equipment, Food Services, Furniture, Grooming, Health (Non-Essential), Hospitality, Hotel, Office (Except Phones), POS Systems, Recreation, Salons, Schools, Signage, Vending


Opportunities to Ramp up Manufacturing with Accounts Receivable Factoring

We have factoring programs that are designed to provide ongoing, monthly, positive cash flow.  This can be vital for the short-term and long-term success of a business, even businesses facing an economic downturn.   Within days, invoices and accounts receivable and turn them into immediate cash that can be used to run your business.  Our funding programs are based primarily on the creditworthiness of the companies paying the invoices.  This is a great funding source for anyone in manufacturing or distribution industries trying to ramp up production.


Commercial Real Estate

Bridge funders are mostly focusing on Multifamily and Industrial Properties at this time.  Most do not even want to look at Retail or Mixed-Use properties…although if the LTV is low enough it is still possible.  It is now common for lenders to want 6-12 times your payment sitting in the bank at time of close as reserves for any real estate loan.  20-30 year Term loans for investment properties are pretty much non-existent right now.  SBA 7a and 504 are still options for owner-occupied CRE (if you are a business still generating strong revenue).


Ground-Up Construction

A limited number of lenders are still doing construction in select markets.  Must be shovel ready.

For a construction loan, lenders are looking for experienced investors who are not highly leveraged with debt or poor credit.


Reserve Requirements are the New Normal

Many lenders are asking for at least 6-12 months of reserves to be brought to the table at close.  Expect this to continue at least through the stay at home.


Lower LTV & ARV’s

Expect LTV’s and ARV’s to be down 10%-15% from what we were accustomed to.  Most lenders are maxing out at 60%-65% for Residential and Commercial Properties


Good Credit is More Important than Ever

Commercial Lenders are concentrating on high-quality deals with strong credit.  Less than a 680 credit is very tough right now.


Residential Mortgages:  Your Job, Your Credit, and More Money Down 

Our firm only works with commercial loans, but for those looking to buy a new home or refinance your existing residential mortgage, your employment is more important than ever – even more important than strong credit.  JPMC accounted this week a minimum down payment of 20% with a FICO of 700+.  Expect other large banks to follow.


Rental Property Financing on Hold

No one is doing loans on long term (or short term) rentals.  The 30 year rental loans are done (for now) since there is no secondary market for them.


More Down & Shorter Terms on Fix and Flip Properties

We can still do these, but most lenders are requiring 20%-30% down on purchase are preferring light rehabs often with shorter terms.


Pricing is Going Up

We’re seeing an increase in minimum rate and points by at least 1% from many funding sources.


SBA 7a and 504 Loans for Businesses in a Position to Grow

Despite all the attention PPP loans are getting, we are still doing SBA 7a loans.  These loans can be used for business acquisition, business expansion, partner buyouts, purchase of owner-occupied real estate, leasehold improvements, refinancing debt, startup costs and equipment. Loan amounts up to $5 million. If your bank is bogged down with PPP loans, we work with lenders who are not participating who can move quick on regular SBA loans.  Another HUGE benefit is that you get six months of covered payments on New SBA Loans that close withing six months of the CARES Act.


Some Loans in Limbo

Most funders are still fully staffed and many are working from home during the stay at home with full access to all the tools needed to underwrite and approve loan transactions.  There are factors at the local level that at best will slow the process.  Getting things like appraisals, environmental site inspections,  notaries on documents,  courthouse filings,  title reports,  DMV title transfers for equipment are not as simple as they were a few weeks ago.


Term Loans/Lines of Credit are still possible

Most funders have hit the pause button on LOC’s.  Unsecured funding for high average balance businesses with at least 1 year in business is still possible for some businesses in the following industries:  Medical, Pharmacies, Food – Distribution &Transport, Supermarkets (not restaurants), HVAC Maintenance, Pool Maintenance, Landscaping, Firearm Sales, and Animal Supplies.


Do Churches and Not for Profits Qualify for Disaster Loans?

If your church or non profit has a 501(c)(3) certificate, then it is eligible for SBA PPP and EILC loans.  If it does not, then it does not currently qualify.  As a back-up option we have been able to secure funding for cash-out on real estate owned by a not for profit.  Keep in mind you will likely be looking at a maximum LTV of 50% and no special use real estate.


Fast Cash with MCA Loans

We don’t promote and purposely do not offer MCA loans, but if most of your revenue comes from credit card transactions and you need fast access to cash and have exhausted all other options, this is a way to get $20k-$2M in less than 48 hours.  We can put you in touch with an MCA lender but your homework first and we recommend the Department of Business Oversight warning before pursuing this option.


Every scenario is different, and the options are rapidly changing.  If you have questions, please do not hesitate to EMAIL or Call us at 916-273-6844 to learn more.

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