Credit tenant loan
WHAT IS CREDIT TENANT LOAN
A credit tenant loan is basically a real estate loan that is given against the security of the obligation of single investment company.This loan is given in order to pay the debt by means of rental payments and by means of a recourse loan obligation.There are of course some requirements that have to be completed before taking a credit tenant loan. These requirements vary from one lender to another and as per the requirement of the credit tenant loan amount.
REQUIREMENTS
The first requirement that is sought by most of the lenders of credit tenant loan is that the tenant should be an investment grade tenant. The second requirement that has to be completed is regarding the structure.Most of the lenders prefer to have a full amortized structure.But this does not mean that structures having smaller balloon payment, say 35% of loan, would not be considered. There is also a bond that has to be signed by the borrower for the credit tenant loan and this bond can be absolute net or it can be a double net-lease bond. On the technical front, the credit tenant loan is required to have the debt service coverage from 1.0-5.0 in multiple terms. However, it depends upon the quality of lease.Credit tenant loans are provided up to 100% of the apprised value and are granted for all the property types and its uses. It also depends upon the strength of the credit tenant.So far the fee for the credit tenant loan is concerned, it varies from one lender to another.
Normally, the fee charged by most of lenders is ½ point.There are also some lenders that charge at least $20000 as fee.There are also some lenders that provide the credit tenant loan for fee of $0.In some cases, the person may be required to get the necessary environment approvals before he can apply for the loan. Before giving the loan, the lender may also assess the physical condition of the structure and in cases where the loan is provided for the double net leases, it is mandatory to get the physical condition of the structure assessed. Since there are risks of earthquakes etc associated with the structure, there are many lenders of the credit tenant loan that require the seismic report pertaining to the area and structure. In cases, if the structure is located in the seismic risk areas, getting the seismic reports becomes more necessary. For getting the credit tenant loan, it is also required by most of lenders that there is special insurance to cover the casualty risk. Minimum amount of loan that is provided under credit tenant loan also differs from one lender to another. For example, some of big credit tenant loan providers in United States may require a person to get the minimum of $7 million.
OTHER ASPECTS
Let us now discuss the related aspects of credit tenant loans. It is not necessary that a person is required to have a good credit for getting the credit tenant loan. There are many lenders that provide the poor or adverse credit tenant loans in order to help the person financially.Normally it has been observed that if a person is not having any property in his name, as most of tenants do not have, it really becomes very difficult for him to get the loan. But with credit tenant loans, it is very easy. Even the bad credit does not prevent him from taking the loan.
Seeing that tenant with poor credit rating are unable to get the loan at easy terms and conditions and in fact, they are rejected by most of lenders, many lenders have come up with credit tenant loans. Even a person having CCJ or IVA or having any default arrears can apply for the credit tenant loan and even there is no restriction put on the use of loan.A person can use the credit tenant loan for buying a home, for purchasing a car, for the purpose of providing education to the children, for enjoying holidays and even for the purposes like wedding etc.
Apart from the poor credit tenant loans, there are also long term credit tenant loans available. A person can easily get the long term credit tenant loan for self amortizing structures and for the non-bond net lease structures. In this type of loan, it is very important that the loan meets the necessary requirement of borrower so that he can fulfill his motive. This type of loan allows a person to get the highest loan proceeds as compared to the rent payments supported by the structure. The major part of the loan is amortized by way of fixed rent payments, as defined in the lease agreements. The lease agreement is such cases is normally 20 years.However, for getting this type of credit tenant loan, there are some requirements that have to be completed.First the credit tenant should be rated as BBB, if the agency is Standards and Poor or BAA3, if it is Moody. All the ratings better than this are accepted. This is done to ensure that a long term credit loan is easily underwritten by the lender. If the tenant is un-rated, i.e. there is no rating given to the tenant, it is upon the lender whether it can provide the loan or not. Similarly, the long term net lease is assumed to have at least a balance of 12 years on the basis of initial lease term. There are also lenders in United States that can accept the tenant with NN, NNN or bond lease but in such cases, the tenants must not be having any unusual rent-abatement. Similarly, there should not be any lease-termination or assignment-provisions.
Last but not the least, the structure in the credit tenant loan must be separated from all the adjacent properties legally. This should be carried out by means of a condominium declaration or by means of sub division.
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