01 Oct Alternative Lending Story Comes Full Circle
October 1, 2014: Last week; my company completed an alternative commercial loan transaction that went full circle that I thought would be of interest to those who want to learn more about private lending. Approximately eleven months ago, WAC arranged and closed a $450,000 commercial loan to a real estate investor on a mixed use commercial property in Connecticut. The loan was funded by one of WAC’s private lenders.
The borrower had experienced some cash flow issues and was having difficulty with the existing mortgage holder on the property who was the former owner of the property. The former owner of the property held a note to finance the purchase of the property at the time of the sale. The borrower’s wife began to experience a major health issue. As a result of this issue; the borrower had to spend more time caring for his wife and less time at work and subsequently; his income decreased over a several month period of time. His decrease in income caused him to go into default on the seller financing on the property and the mortgage holder began litigation thus leading to a foreclosure action on the property.
The borrower consulted with his attorney who advised him to file a bankruptcy petition. The bankruptcy would not only have destroyed his credit for many years but would have cost the borrower thousands of dollars in legal fees and would have also made it even more difficult to refinance the property at a later date.
I was able to convince the borrower to refrain from filing bankruptcy and; instead; refinance the seller’s note with a private loan to buy him some time and then list the property for sale so that he can sell the asset and monetize the inherent equity in the property.
Fast forward eleven months later. After closing a private loan for $450,000 on the property to pay off the seller’s note, the borrower successfully sold the property for approximately $700,000. The borrower was able to pay off the $450,000 private loan and walk away from the transaction with a nice cash cushion for he and his family. In addition; WAC’s private lender earned an excellent ROI on the loan and was able to monetize their investment in less than one year from the time that the loan closed.
In short; this transaction was a “win win” scenario for all parties involved. The borrower avoided a costly and damaging bankruptcy and ended up with six figures plus in cash after paying off his debts. The existing mortgage holder was paid in full and avoided taking back the property. Also; WAC’s private lender was also paid in full and earned a very solid return on their investment and can now reinvest those proceeds into another investment of some kind.
This difficult situation actually had a simple solution and my company was able to “piece the puzzle” together to create a winning solution for those who were involved.
WAC specializes in arranging debt financing for both small businesses and real estate developers/investors and also handles bank workouts for those same clients. You can learn more about WAC by taking a look at their website and Youtube video at worthavenuecapital.com and by contacting WAC’s principal, Michael M. Ciaburri at email@example.com or (203)605-4082. WAC maintains offices in both Guilford and Westport, Connecticut. You can now follow @worthavecapital on Twitter for the latest lending news.