A bridge loan is a specific type of asset-based loan financing in which a borrower receives funds secured by the value of real estate. Bridge loans are typically issued at much higher interest rates than conventional commercial loans and are almost never issued by a commercial bank. A bridge loan often refers to a commercial property or investment property that may be in transition and does not yet qualify for traditional financing. We have helped structure and have provided numerous hard money loans for many developers who simply require situational financing within a very restricted time frame.
Mezzanine capital refers to a subordinated debt or preferred equity instrument that represents a claim on a company���s assets, which is senior only to that of the common shares. Mezzanine financings can be structured either as debt (typically an unsecured and subordinated note) or preferred stock. Mezzanine capital often is a more expensive financing source for a company than secured debt or senior debt. The higher cost of capital associated with mezzanine financing is the result of its location as an unsecured, subordinated (or junior) obligation in a company���s capital structure (i.e., in the event of a default, the mezzanine financing is less likely to be repaid in full after all senior obligations have been satisfied). Additionally, mezzanine financing provided by our lenders, are often used by smaller companies and usually involve greater overall leverage levels than issuers in the high yield market and as such involve additional risk. In compensating for the increased risk, mezzanine debt holders will require a higher return for their investment than secured or other more senior lenders.
A joint venture (often abbreviated JV), is where two parties agree to create a new entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. There are many reasons for forming a real estate joint venture with
Working capital is a financial metric which represents operating liquidity available to a business. Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm’s short-term assets and its short-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. We can help finance a working capital deficit if the collateral offered is in the form of plant (real estate), equipment, inventory or receivables.
Debtor-in-possession financing or DIP financing is a special form of financing that some of our lenders can provide for companies in financial distress or under Chapter 11 bankruptcy process. Usually, this security is more senior than debt, equity, and any other securities issued by a company. It gives a troubled company a new start, albeit under strict conditions. In most cases, the DIP loan is repaid in full as part of the debtor’s emergence from Chapter 11 and is considered attractive because it is done only under order of the Bankruptcy Court, which is empowered by the Bankruptcy Code. Debtor-in-Possession financing can also provide corporate bankruptcy financing to engage in a prepackaged business bankruptcy where the asset -based lender providing DIP financing supplies the funds to work out a settlement with creditors up front, in order to walk into corporate bankruptcy court with this prepackaged settlement.
Recapitalizations are provided by our lenders when the shareholders of a privately held company desdegree of liquidity short of an outright sale or public offering. In these situations we can provide a financing structure to providethe owners and allow them to retain significant or all ownership in their company. To optimize the benefits of a corporate capitalization for urrent owners we strive to design and implement an appropriate capital structure and recapitalization strategy after determining the company���s market value and debt capacity.
When a person or company pledges a mortgage as collateral for a loan, it refers to the right that a lender has to liquidate goods if you fail to service a loan. During the past year of the credit crisis, our lenders have executed hypothecation loans for several lenders actively engaged in the commercial hard money business as their conventional credit lines have been severely restricted. These are short term loans that are entirely collateralized by real estate mortgages and corporate and personal guarantees by extremely credit worthy borrowers who have been in business for many years. This type of hypothecation loan is also known as a warehouse credit facility.
Revolving credit is a type of credit that does not have a fixed number of payments. The borrower may use or withdraw funds up to a pre-approved credit limit. The amount of available credit decreases and increases as funds are borrowed and then repaid; the credit may also be used repeatedly. The borrower makes payments based only on the amount they’ve actually used or withdrawn, plus interest. In some cases, the borrower is required to pay a fee to the lender for any money that is undrawn on the revolver. Our lenders has extended many such credit facilities over the past 10 years and has been especially active in this space during the recent credit crisis.