There are funding opportunities that may seem too good to be true. Most of these programs are usually termed 100% commercial financing programs, often advertised all over. There is so much deception and twisting of facts out there and one needs to know truth about what is really viable in terms of commercial financing.
There are realities about getting 100% financing for commercial projects. Although it is true that there are such offers, it is critical to know the facts about the programs beforehand. Below are some of the facts concerning such 100% commercial financing opportunities:
First, one may get a mutual project associate, but he or she must have a very attractive project. To attract a project partner, one needs an average rate of return of 30% or more. In brief, if it is not a source of income, it is unlikely that it will be funded.
Secondly, you can almost guarantee your success by going through a planned finance program. Here, the probability of succeeding can be quite high if the project is accepted. In other words, it may require patience and some groundwork to make it work.
The other fact is that one can get into working with asset managers who will fund the project at 100%. However, most of them will require the borrower to deposit a sizeable amount of security with them. The benefit of this is that the collateral can generate attractive returns, while the individual gets his or her project financed at 100%.
Before, it was not uncommon for government agencies to own the buildings they worked in. Nowadays, however, the trend is for the building to be owned by a separate developer or proprietor, and only leased to the agency. The government has realized that real estate ownership is not precisely consistent with its main objectives. As such, they would rather have open cash flow instead of latent equity. Moreover, the government is trying to liquidate existing equity by performing ‘sell and lease back’ dealings, whereby they sell buildings they own, get the finances, and then lease the building back from the owner who has bought it.
In summary, even though commercial financing is possible at 100%, there are subtle issues and facts that the borrower needs to know. This is because sometimes borrowers may not be given true facts about the financing program, which is critical for making an informed choice.