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Case Scenario From Loan Broker
CASE SCENARIO FROM DANNY VESOKIE QUESTIONS: Are you a super broker or direct lender. FINANCIAL PACIFIC out of Seattle did a food trailer for $45,000, 25% to 30% rate, $1,100 month for 60 months. EFA EQUIPMENT FUNDING AGREEMENT FIRST MONTH AND LAST MONTH DOWN. COMMERCIAL LOAN BROKER MADE 12% COMMISSION. DOC FEE $250, PREFUNDING FEE OF $200.END USER PAYS TO RESTAURANT OWNER. DMV PAPERWORK PRO TRUCK COMPANY PAYS. CREDIT SCORE 700, 7 YEARS IN BUSINESS.
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3 Replies
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Financial PACIFIC Leasing, Terry Jennings, has Super Broker BSB LEASING OUT OF DENVER COLORADO. DANNY DEALS WITH SUPER BROKER WHO DEALS WITH FINANCIAL PACIFIC LEASING. 15% points total. DANNY MAKES 12%, SUPER BROKERS MAKES 3%
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DANNY, HERE’S YOUR ANSWER. YOUR LENDER CHARGING 15% AT 30% RATE FOR 5 YEAR TERM LEASE. WE DON’T DO LEASING. ITS PURCHASE. THEY OWN IT AFTER PAYMENTS ARE SATISFIED. OUR RATES ARE 12% TO 15%. NOTHING DOWN. 700 FICO. NO DOC IP TO $150,000. WE CAN GO OVER $150,000 WITH LIGHT DOC. We are direct commercial direct lender and we deal with hedge funds securitize AND KEEP INHOUSE OR sell. We do SBA 100% financing. On the same food trailer the pricing
$45,000 food trailer
1077 IRS Purchase
SBA EXPRESS LOAN
MANY COMPANIES USE LEASING AND NOT PURCHASE. PURCHASE PAYMENTS ARE HIGHER VERSUS LEASING
$45,000 LEASE
$45,000 PURCHASE
NO FIRST OR LAST MONTHS
TERMS 5, 7, AND 10 YEAR TERM
CANNOT USE LOAN USE FINANCING
CASE SCENARIO ON A
$100,000
RATES 12% TO 15% RATES. HIGHER THE RATE THE MORE BROKER MAKES. 24 TO 48 HOUR CLOSING.
6% TO 10% POINTS CHARGING TO BORROWER. BROKER GETS PART OF THIS
YOU MAKE money on the interest.
WAREHOUSE LINE ON COMMERCIAL LINE 1.5% TO 2.0% NOT FLOATING
WAREHOUSE LINE ON RESIDENTIAL LINE IS 6% FLOATING
YOU MAKE PART OF INTEREST PAYMENTS
NO Upfront Fees SINCE ITS A PURCHASE
$45,000 EXAMPLE
REFERAL 3% TO BROKER
KICKER OR POINTS UPFRONT LIKE YOUR COMMERCIAL LENDER
2% POINTS TO LENDER 3% TO BROKER. YOU CAN CHARGE MORE.
NO SBA FEES UP TO $150,000 SO DOWN FROM BORROWER SINCE ITS PURCHASE. NO FIRST MONTH OR LAST MONTH PAYMENTS. PAYMENTS ON PURCHASE ARE HIGHER VERSUS LEASE. DIANNE BURNETT WILL COVER MORE FAQ CASE SCENARIOS ON THIS FORUM.NEXA Mortgage is a mega mortgage broker. AXEN Mortgage is a correspondent mortgage lender on residential mortgage lending.
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Case Scenario Analysis: The Questions by Danny Vesokie.
In this case, a few important components and questions arise regarding financial transactions for a food trailer. Let’s break down the details and look for answers to the questions. Let us begin with what has been termed as the scenario overview.
Case Analysis:
Amount of Loan: $ 45,000 to purchase the food trailer.
Interest Rate Charged: Between twenty-five to thirty percent.
Payable every month: Dollar one thousand one hundred over 60 months.
Fund Provided: Financial Pacific out of Seattle.
Intermediary: EFA Equipment Funding Agreement.
Commission: Twelve percent of the commercial loan amount.
Charges/fees:
Documentation Charge: 250 USD dollars.
Pre-funding Fees: 200 USD dollars.
End User Payment: The restaurant owner was paid.
DMV Paperwork: This was completed by the company that built the truck.
Credit Score: 700.
Years in Business: Seven years in this business.
The above key questions and their answers are:
Are You a Super Broker or Direct Lender?
Answer:
- This depends on the role being played in this case.
- There are two main categories of lenders: super brokers who work with several lenders to find the best interests of their clients, and direct lenders who offer funding themselves.
- Let us note here, too, that if Danny deals with Financial Pacific loans but gets funding from other parties, he is considered a super broker.
- Otherwise, if the case is different, he is a direct lender.
Analysis of Loan Terms:
Interest Rate: The 25% -30 % interest rate charged is very common for lower credit borrowers and borrowers in higher-risk industries such as equipment financing. However, a borrower with a 700 credit score is most likely to be able to negotiate better terms and conditions within their loan.
Monthly Payment: It is expected that there will be a monthly payment of $1,100 for 60 months, which translates to a total payment of $66,000 over the loan period. This shows the cost range of borrowing.
Commissions and Fees:
The commission of up to 12% for the commercial loan broker is fairly high, amounting to $5,400 US dollars when the total loan is $45,000, consistent with the trends observed in equipment financing.
Doc fees and pre-funding fees are common within the industry and add up to $450 dollars, and these should be presented to the borrower at the start.
End User Payment:
The end user, the restaurant owner who has been loaned, is important in the sense that all the terms of the loan, from fees to payments and everything in between, should be clear in the loan agreement so that there are no grey areas.
DMV Paperwork:
The restaurant owner may benefit from this since involving the truck company in the DMV paperwork can be very convenient and legal regarding the food trailer for the restaurant owner.
Business Longevity:
- The borrower has 7 years in business and a credit score of 700.
- This makes them look like a fairly stable candidate for financing, which is worth noting when explaining to potential lenders.
- Knowing how equipment financing works and where brokers and lenders fit within it is important.
- Clearly stating the terms, including the interest rate, fees, and obligations undertaken, will streamline the process for every stakeholder in the transaction.
- While acting as a super broker or a direct lender, it is helpful to be open and offer assistance to improve the borrower’s experience and build trust.