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Using Creative Financing in Credit Starved Times

By incorporating mezzanine, bridge, and equity into the capital structure of a transaction it helps you to leverage your financing. Lenders have reduce the amount of funding they will give you on project financing by having reduced their LTV (Loan to Value) lending guidelines. This added burden has had the effect of slowing down the number of transactions or project financing.

Many Investors (including hard money) have rushed in to provide the 5 – 20% differential needed for “The Deal” expecting to receive the higher yield available to them. Because many are new and inexperienced, rates and terms have been inconsistent. Nothing has changed regarding perception of how good an opportunity looks. If the Person borrowing is strong, experienced, has strong financials, and can demonstrate experience in their market place, more than likely that Person will find the best pricing.

For the Investor/ Lender, determining the suitability of a projects is still a work in progress. The Borrower needs to provide a presentation of information easy to follow. Starting with a strong executive summary. The KISS formula still works miracles.

Make sure there is a defined exit strategy to repay debt. Help your lender know that in addition to providing a return on his equity, you will also be paying off the loan.

Finish by explaining where the funding is going to take you and why you should received any help. Lenders only make money when they lend…so give them a reason!

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