November 24, 2020
Obtaining financing for medical real estate can be daunting and overwhelming, especially for in-demand physicians with limited time. When physicians seek competitive financing terms, they are often unaware of how banks determine which borrowers are desirable.
To simplify the process, CMAC is highlighting some of the characteristics that lenders seek.
Characteristics of a Strong Borrower:
- LTV (Loan-to-Value) – Lenders prefer borrowers who want a lower (<80%) LTV as it ensures the lenders of the borrower's commitment to the transaction.
- Funds, Funds, & Funds – When it comes to a refinance, the plans for the equity from the asset matters. Using the funds to pay for closing costs, or to invest in another revenue-generating opportunity, is ideal. Planes, trains, and automobiles are great but cause a borrower to lose that competitive financing edge.
- Personal Guarantees – There are various ways to personally guarantee your debt, so investigate the Joint & Several Unlimited or Pro-rata of >125% structures, which are attractive to lenders. Personal guarantees by borrowers give the lender a boost of confidence.
- Ownership – When a medical practice seeks to own 100% of the building from which they operate, it creates an almost seamless relationship between borrower and lender. The borrower has full control, acting as both the landlord and the tenant. The success of the rental income is driven by the success of the operations of the tenant. Win-Win.
These are just a few characteristics that are considered during a bank's underwriting process. CMAC Partners conducts an intense pre-underwriting review before vetting the market on behalf of each one of our clients. This provides groups with clarity and certainty about what they can expect while we help lead the way to make their medical real estate objectives become a reality.