For professionals seeking quick and flexible financing solutions, hard money lenders are an invaluable source of opportunity in the real estate industry. While these lenders offer a lifeline for those looking to seize lucrative opportunities, navigating the terrain requires caution. In this article, we’ll shed light on common mistakes professionals make when borrowing from hard money lenders and provide valuable insights to steer clear of these pitfalls.

Mistake 1: Underestimating the True Cost

One prevalent mistake is underestimating the true cost of borrowing. Hard money loans often come with higher interest rates and fees compared to traditional financing options. Professionals must meticulously analyze the total cost of the loan, including interest rates, origination fees, and any other associated charges. By doing so, borrowers can make informed decisions about whether the investment remains profitable in the long run.

Tip: Always request a clear breakdown of all costs associated with the loan and carefully assess how they align with your overall financial strategy.

Mistake 2: Ignoring the Terms and Conditions

Another common pitfall is neglecting the fine print in the loan agreement. Hard money lenders may impose strict terms and conditions, such as short repayment periods and high penalties for default. Professionals must thoroughly review the terms, seeking clarification on any ambiguities. Ignoring these details can lead to financial stress and potential legal complications.

Mistake 3: Overleveraging Without a Cushion

One critical oversight is overleveraging without a financial cushion. Some borrowers make the mistake of borrowing the maximum amount without considering unexpected expenses or market fluctuations. This can lead to financial strain and increase the risk of default.

Tip: Build a financial cushion into your borrowing strategy, considering potential unforeseen expenses, market uncertainties, and other risk factors.

Mistake 4: Failing to Have an Exit Strategy

A crucial oversight is neglecting to establish a clear exit strategy. Hard money loans are typically short-term, and professionals need a well-thought-out plan for repayment. Without a viable exit strategy, borrowers may find themselves scrambling to secure alternative financing or facing unfavorable terms for an extension.

Tip: Develop a comprehensive exit strategy before obtaining the loan, considering potential challenges and outlining specific milestones for repayment.

Conclusion

Borrowing from hard money lenders can be a strategic move for professionals in real estate and investment. However, avoiding common mistakes is essential to ensure a positive and profitable experience. By thoroughly understanding the costs, scrutinizing the terms, being cautious about overleveraging, and having a well-defined exit strategy, professionals can navigate the terrain of hard money lending with confidence and success.

US commercial real estate prices have fallen this year for the first time in more than a decade, according to Moody’s Analytics, heightening the risk of more financial stress in the banking industry.  What property types are declining? (hint not just office properties).  What is the only property type that held in positive territory?  Is the recent drop in prices just a blip or the start of a bigger trend?  Why are prices falling now while the economy continues humming along?

What was in the most recent commercial data?

The recent CoStar report, the leading aggregator of commercial data,  showed declines in Office, retail, and apartments.  CoStar has some of the best insight into commercial property values as they also track heavily via Loopnet (largest commercial MLS)

1. THE PRIME INDUSTRIAL INDEX LED GROWTH AMONG THE FOUR MAJOR PROPERTY TYPES. The Prime U.S. Industrial Index was up 2.5% in the first quarter of 2023 and 10.8% in the 12 months ending in March 2023. The equal-weighted U.S. Industrial Index, including a broader mix of asset qualities, underperformed the Prime Index with a modest decline of 0.1% in the quarter. The Prime Industrial Index was the only Prime property type index to hold in positive territory in the first quarter. 
2. MULTIFAMILY INDEX DECLINES. The equal-weighted U.S. Multifamily Index fell by 2.4% in the first quarter of 2023 and dropped 2.2% in the 12 months ending in March 2023. The U.S. Multifamily Index showed the sharpest annual decline in values since the interest rate hiking cycle began in the first quarter of 2022. Debt for multifamily transactions was plentiful and drove investor demand in the sector. The index appreciated by 2.8% in the 12 months ending in March 2023 in Prime Multifamily markets but fell 2.8% in the quarter.
3. OFFICE PRICE DECLINES CONTINUED IN THE FIRST QUARTER. The U.S. Office Index sagged 2.4% in the first quarter of 2023, taking its cumulative decline to minus 5% during the previous three quarters. Office prices were down 1.4% in the 12 months ending in March 2023, marking the first annual decline since the second quarter of 2012. In addition, pricing growth in the Prime Office Index advanced at a negligible pace of 0.4% in the 12 months ending in March 2023 while slumping 2.8% in the quarter.
4. RETAIL PRICING FOOTED SIDEWAYS IN THE FIRST QUARTER. The U.S. Retail Index rose just 0.2% in the first quarter of 2023 and 3.3% in the 12 months ending in March 2023. The tendency of high-profile pair trends to swing the data around at the top end of retail space can lead to strong quarterly fluctuations. The U.S. Prime Retail Index dipped 2.6% in the first quarter while appreciating 12.3% over the year prior. The three-quarter trend in the Prime Retail Index saw values surge 9.9% in the third quarter of 2022 before giving back 2.8% and 2.6% in the fourth quarter of 2022 and the first quarter of 2023, respectively.

Why is multifamily declining as rents are staying high?

Below I put together a hypothetical analysis of what is occurring in the multifamily sector.  Multifamily was trading at insanely low cap rates while at the same time banking on appreciating rents.  As rents have stagnated or even declined in some markets and interest rates have basically doubled, many apartment deals no longer cash flow and are in trouble.  Furthermore, it is more than likely that a bank holds the note below and that note is now a  big problem for them.  Here is a great article in the Wall Street Journal that shows how this is playing out in real life.

Remember most commercial loans are fixed for 3-5 years and then the rate resets to the market rate (typically 10 year treasury +).  This scenario below is especially difficult:

1. LTV using new cap rate is radically different: No lender today would provide a new loan with the cash flow basically at break even due to the higher rate.
2. Cash flow underwater based on new rate: Assuming the note is current and the lender sold the note, a substantial discount would have to be given to compensate for the ultra-low rate.
3. Even if note is held and renewed a substantial loss would have to be taken by the bank for impairment

Pre Covid
Net Operating Income	$    300,000.00
Value	$ 7,500,000.00	assume a 4 cap
Debt service	$         210,000	5.25m (70% LTV at 4%)
Net Cash Flow	$      90,000.00
Today
Net Operating Income	$    300,000.00
Value	$ 5,454,545.45	assume a 5.5 cap
Debt service	$         315,000	5.25m (70% LTV at 6%)
Net Cash Flow	$    (15,000.00)

Is the recent decline in commercial property values a blip or a trend?

“Lots more price declines are coming,” Mark Zandi, Moody’s Analytics chief economist, said.

The danger is that will compound the difficulties confronting many banks at a time when they are fighting to retain deposits in the face of a steep rise in interest rates over the past year.

Excluding farms and residential properties, banks accounted for more than 60% of the $3.6 trillion in commercial real estate loans outstanding in the fourth quarter of 2022, with smaller institutions particularly exposed, according to the Federal Reserve’s semi-annual Financial Stability Report published last week.

“The magnitude of a correction in property values could be sizable and therefore could lead to credit losses” at banks, the report said.

Summary

The recent declines in commercial properties are not a blip.  They are the beginning of an upcoming cycle with huge resets in prices.  These prices will be most profound in office with big impacts also being felt in larger multifamily.

Based on the current federal reserve predictions, rates will remain elevated at least until around mid-year 2024.  This will exasperate the issue new group of office and multifamily notes come due for a reset leading to cash flow issues in many cases.

The overwhelming majority of commercial loans are held by banks so at the end of the day someone will be taking a haircut that will become self-fulfilling as lenders sit out on new deals due to their own cash flow issues caused by commercial property.  I’m already seeing the credit crunch which will get amplified over the next year with higher rates.

Ever stumbled upon a quaint café in an unexpected place and thought, “How did I not know about this?” The world of real estate has its own hidden cafes—secondary and tertiary markets. But why are they like hidden gems, and how can you, as an investor, benefit from them? Let’s unpack it:

• Primary Markets: These are big players such as Dallas, LA, or Chicago.
• Secondary Markets: Cities like Austin, Nashville, and Portland, which have been gaining traction.
• Tertiary Markets: Think of areas like Bend, Oregon, or Macon, Georgia. They may be talked about less, but they’re brimming with potential.

Considering a fix-and-flip project or rental investment properties in these lesser-sung regions? Let’s weigh some of the pros and cons.

Upsides of investing in secondary and tertiary markets

Cost-efficient entry

These markets are often in regions that haven’t experienced the rapid urbanization and commercialization in primary cities. Without the hype and media attention driving up property prices, entry costs remain relatively low. This allows investors to make strategic, calculated investments without the heavy financial weight that prime markets often demand. A savvy investor can view this as an opportunity to diversify their portfolio, leveraging the affordability of these markets.

Less crowd, more space

Most often in the limelight, primary markets attract domestic and international investors. In contrast, secondary and tertiary markets remain relatively under the radar.

The charm of this understated focus is the freedom it offers. Real estate investors can take their time to understand a property, negotiate without the pressure of multiple counter-offers, and finalize deals in a less aggressive environment. This space for deliberation can lead to more informed and, ultimately, profitable decisions.

Promising returns

The untapped nature of these markets means there’s substantial room for growth. The ROI here isn’t just about immediate profits. It’s also about long-term appreciation.

As these markets mature and attract more attention, early investors can see substantial returns on their initial investments. To succeed in these markets, look for properties that can increase in value over time as the market changes.

Steady growth

Primary markets are influenced by global trends and international investments. On the other hand, secondary and tertiary markets typically experience growth as a result of local factors.

This means growth is often steadier and more predictable, grounded in local economic and infrastructural developments. For an investor, this translates to more sustainable, organic appreciation. Monitoring local news, understanding community plans, and keeping an ear to the ground can provide valuable insights into potential growth trajectories.

Challenges of investing in secondary and tertiary markets

Potentially more demanding research

The relatively low-profile nature of these markets means that traditional real estate research tools might not always offer comprehensive data. This challenge, however, is also an invitation for investors to innovate. Engaging with local realtors, joining community forums, and even connecting with residents can offer invaluable insights. Immersive research helps choose properties and understand local culture, preferences, and long-term investment viability.

More gradual appreciation

These markets are influenced by local factors. So, the speed of growth may not be as fast as the rapid increases seen in top markets.

However, slow and steady growth can be a blessing in disguise. It gives investors the time to adapt, make further investments, or even exit if they foresee a plateau. Recognizing the steady nature of these markets is essential to setting realistic expectations and crafting a strategic investment plan.

Networking nuances

The bustling real estate events and seminars are less frequent here, but that shouldn’t deter the passionate investor. Embrace this as an opportunity to pioneer. Host local meetups, collaborate with community leaders, or even establish digital forums for like-minded investors targeting these markets. By taking the initiative, you not only build a network but potentially position yourself as a thought leader in the space.

Market variability

These markets can be sensitive to local economic shifts. A significant employer downsizing or a local industry experiencing a downturn can have palpable effects.

But with challenge comes opportunity. Staying informed about local happenings can allow proactive investors to pivot strategies, hedge risks, and even identify new avenues for investment. Regular engagement with local businesses and economic forums can be invaluable.

Taking the plunge: Market research and tips for new local market investments

It’s pivotal to acknowledge the importance of thorough market research when considering investments in secondary and tertiary markets. Venturing into these lesser-known territories requires a tailored approach. So, where should you start?

• Local Expertise: Building relationships with local real estate agents or brokers can offer unique insights that standard market reports might miss. They have their fingers on the pulse of the local community, understanding the intricacies and trends that define these markets.
• Community Forums & Social Media: Engage in local online forums or social media groups. These platforms have valuable information about neighborhood developments, upcoming projects, and local events that can affect property values.
• Visit In-Person: Nothing beats an on-ground visit. Walk the neighborhoods, visit local businesses, and strike up conversations with residents. This will show you the community spirit and help you understand how many people want to rent or buy renovated properties.
• Assess Local Amenities: Look for signs of growth. Are new schools being built? Are there parks and recreational areas? What about public transport facilities? These can be indicators of a budding community, which can be especially attractive for rental investments.
• Stay Updated: Once you’ve gathered your initial insights, it’s essential to keep updating your knowledge. Markets evolve, and what’s true today might change in a few months. Set up Google alerts, subscribe to local news outlets, and keep in touch with your local connections.

Venturing into a new market also means adapting your investment strategies to align with local demands. For fix-and-flip projects, understanding the local architectural preferences, popular home features, or even favored color palettes can be the difference between a property that sells instantly and one that lingers on the market.

For rentals, it’s about understanding the demographics. Are potential tenants young professionals, families, or perhaps retirees? Each group has unique needs, from proximity to schools to easy access to nightlife.

Aside from conducting market research, it is crucial to find a reliable lending partner. One that has a proven track record and expertise in the local market.

That’s where Muevo comes in

At Muevo, we’re changing the real estate financing game. Our presence in 50 states plus DC has equipped us with diverse market insights. We’ve seen the aspirations of investors in primary cities and the untapped passion of those in secondary and tertiary ones. This broad spectrum of experience allows us to offer tailored financing solutions, from Fix and Flip/Bridge Loans to DSCR Rental and Rental Portfolio Loans.

We combine the agility of technology with human expertise, ensuring you close deals faster, enjoy competitive rates and have our unwavering support in every step.

Wrapping up

Exploring secondary and tertiary markets means embracing both the challenges and opportunities they present. The key? Knowledge, diligence, and a reliable partner in your corner. As the landscape of real estate investing evolves, staying informed and adaptable can be your greatest asset.

So, whether you’re diving into the deep end or just dipping your toes, remember every market has its unique story. Happy investing, and here’s to uncovering the next great opportunity!

Spring’s Housing Market Is About To Reach a Peak With ‘Outsized Impact’ Buyers Really Need Right Now

As strange as the housing market has gotten lately, certain seasonal rhythms still prevail. And despite being somewhat dampened by stubbornly high home prices, roller-coaster mortgage rates, and an unpredictable economy, the spring homebuying season is about to reach an apex that’s well worth taking advantage of.

“We’re moving into the period of the year when the number of newly listed homes tends to peak—usually in May or June,” notes Danielle Hale, chief economist for Realtor.com®, in her weekly analysis.

Granted, this seasonal pinnacle might not seem all that noticeable, since the number of new sellers listings their homes is still lower than it was at this time last year. For the week ending May 6, 16% fewer new homeowners listed their homes for sale. Still, this annual decline has been steadily shrinking week by week.

Even though there is still a gap, it’s smaller than what was typical in most of March and April,” explains Hale.

And although new listings are down from last year, total inventory (of both new and old listings) is up 31% for the week ending May 6. In other words, there are plenty of homes for sale, although buyers might need to give stale listings a second look. This portends a potential boost to the overall housing market and offers hope to both buyers and sellers.

In short, the housing inventory is “evolving,” according to Hale. “While further moderation is needed, this is a welcome improvement that comes as new listings near their seasonal high point. Improvement now could have an outsized impact.”

We’ll break down what this all means for both homebuyers and sellers in our latest installment of “How’s the Housing Market This Week?”

The latest mortgage rates and home prices

What’s not so rosy? High mortgage rates are generally holding steady. The interest rate on a 30-year fixed-rate mortgage averaged 6.35% in the week ending May 11, according to Freddie Mac. That’s a bit lower than last week’s 6.39%, but still high enough to make many buyers uncomfortable.

Further compounding buyers’ problems is that housing prices are still inching upward.

The national median list price came in at $430,000 in April, up from $424,000 in March. But for the week ending May 6, home prices grew at a rate of just 2.4% compared with last year. That’s its slowest growth rate since May 2020, when the COVID-19 pandemic was raging across the country.

While tapering home prices is a glimmer of positivity for homebuyers, it’s not enough to really temper their bottom lines quite yet.

“For potential first-time homebuyers, this means that affordability will continue to be a top concern,” explains Hale. “For potential sellers, this means equity is still relatively high.”

What the spring market’s peak means for home sellers

While sellers are understandably thrilled by higher home values, they might have to drop prices soon, since many homes have been sluggishly stuck on the market with no takers.

Home sales have slowed for the past 40 weeks, with homes spending an average of 16 days longer on the market for the week ending May 6 compared with the same week one year ago.

And home sellers might struggle as more properties hit the market in the coming weeks.

“As market competitiveness wanes, sellers may become more flexible,” says Hale. However, the “degree of slowing observed depends on your local market. For example, homes are spending a little over a week longer on the market compared to a year ago in the Midwest and Northeast, where we know housing markets have fared better as affordability keeps demand high.”

Yet in the South and West, homes spent two more weeks on the market for the week ending May 6 compared with a year ago.

The key takeaway here is that while it’s important to understand national context, what really matters are the trends in your local market,” says Hale.

Spring’s Housing Market Is About To Reach a Peak With ‘Outsized Impact’ Buyers Really Need Right Now

A small business line of credit is one of the most common forms of financing available: a lender extends credit, and a borrower can draw as much as needed up to a designated limit. Once the lender receives repayment of the borrowed funds, it replenishes the credit line so the business owner can draw from it again. This revolving credit line thus acts much like a credit card.

Business lines of credit fall into three categories: unsecured, secured, and personal. Lenders have varying requirements for each, with the biggest differentiator being the need for collateral like real estate or equipment with secured lines of credit. Lenders also offer unsecured lines of credit that don’t require collateral. While unsecured lines of credit are easier to qualify for, they also have shorter repayment terms and typically charge higher interest rates. The best business lines of credit allow higher flexibility, offer competitive rates, and let borrowers draw money as needed.

Who a Small Business Line of Credit Is Right For

A small business line of credit is a great financing tool for businesses as it can be used for ongoing expenses. It may also be used to smooth out cash flow in slow seasons or to help expand a business.

Small business lines of credit can be used by:

• Small businesses with recurring expenses: Business owners use small business lines of credit to cover expenses like rent, utilities, and payroll. Short-term business lines of credit are a popular option.
• Companies planning for an emergency: Financial advisors recommend that business owners apply for financing before a need arises to get better rates and terms.
• Seasonal businesses: Businesses such as restaurants rely on lines of credit to cover expenses in the off-season and to buy inventory in advance of their busiest times of the year.
• Businesses seeking some type of equipment purchase: Equipment with short lifespans or items that cannot be claimed for depreciation can be purchased with business lines of credit. If you’re looking to purchase vehicles or larger capital equipment, an equipment loan with a fixed term arguably makes more sense.
• Startups and newer businesses seeking to inject capital: Startups and businesses in the early stages of development or expansion sometimes require the owners to inject some liquidity. Business owners can get low rates by using their homes as collateral for a home equity line of credit (HELOC), and startup founders can get personal lines of credit.

Types of Small Business Lines of Credit

Once a business owner identifies why they need a line of credit, they should determine what type of line to get. Unsecured lines of credit don’t require collateral but have short repayment terms and higher rates than the other options. Secured lines of credit require collateral but offer lower rates and longer repayment terms.

Unsecured Small Business Line of Credit

Unsecured small business lines of credit have short repayment terms and charge higher rates than secured options. However, this type of funding is useful in an emergency and has much lower requirements for qualification. Businesses can often apply online.

Types of unsecured lines of credit include:

• Short-term: This type of line of credit has repayment terms that last up to two years, with weekly or monthly payments. Funding amounts are $250,000 or lower and are best used by small businesses or for recurring expenses such as inventory.
• Medium-term: This is a small business line of credit that offers up to five years for repayment and funding up to $500,000. Business owners use these loans for seasonal expenses and variable-cost projects. Banks and some alternative lenders offer this type of line of credit.
• Business credit card: Credit cards are the most common form of personal and business financing. Qualification standards are often easier compared to secured lines of credit, and credit limits can be up to $100,000. Business credit cards are a good option in a small business financing toolkit. Many cards offer rewards to small business owners for spending.

Unsecured Small Business Line of Credit Requirements

Type	Minimum Credit Score	Shortest Time in Business	Minimum Annual Revenue
Short-term	550	6 months	$100,000
Medium-term	680	1 year	$100,000
Business credit cards	600	No minimum	No minimum

Short-term lines of credit have fairly relaxed requirements for financing, making them a viable option for business owners with low credit scores and cash flow issues. However, these products carry higher interest rates and lower credit limits than secured lines of credit.

Unsecured Small Business Line of Credit Rates and Fees

Type	APR Range	Origination Fee	Maintenance Fee
Short-term	15% to 80%	Up to 2%	None
Medium-term	10% to 30%	Up to 2%	None
Business credit cards	Up to 30%	None	Up to $150 per year

Business owners should note that while short-term funding carries a higher annual percentage rate (APR), the total cost of borrowing also factors in how long it takes to repay debt. A short-term draw repaid in one year at 25% APR will cost less than a medium-term draw repaid over two years with a 15% APR.

Unsecured Small Business Line of Credit Terms

Type	Maximum Credit Limit	Longest Repayment Term	Fastest Speed of Funding
Short-term	$250,000	24 months	1 day
Medium-term	$500,000	72 months	2 weeks
Business credit cards	$100,000	Indefinite	1 week

Funding speed and credit limit are two important factors to consider when choosing a lender, followed by how long you’re allowed to repay borrowed funds. When business owners encounter a funding emergency, they need funds right away and can’t risk only being approved for part of what they need. Business owners should anticipate that, in most cases, a business will qualify for less than the amount they apply for.

A great unsecured line of credit is available with MuevoLoans. Muevo Loans offers lines of credit of up to $250,000 for businesses with at least a 600 credit score. The application takes only minutes and funding can occur within a matter of 24 hours.

Visit MuevoLoans

Secured Small Business Line of Credit

A secured business line of credit is a good choice for business owners who have significant collateral to pledge and need access to larger amounts of capital. Funding is available for up to $25 million, rates are low, and repayment terms extend up to 10 years.

Secured line of credit types include:

• Bank-issued: These small business lines of credit can have credit limits as high as $5 million. Many banks will utilize the Small Business Administration (SBA) CAPLine program. Interest rates tend to fall below 10% with repayment terms of up to 10 years, making them best for larger projects and larger businesses.
• Equipment-backed: Lenders offer equipment-backed lines of credit up to $25 million. These are best used to finance the purchase of several vehicles for a fleet or to finance construction equipment to complete a project. Equipment-backed lines of credit have repayment terms up to the useful life of the equipment.
• Invoice-backed: Invoice-backed lines of credit are similar to invoice factoring. However, business owners don’t sell invoices, and the line of credit amounts can reach $10 million. There are also no repayment terms because as lenders collect invoices, they apply payments toward their line of credit balance.

Secured Small Business Line of Credit Requirements

Type	Minimum Credit Score	Shortest Time in Business	Smallest Annual Revenue
Bank-issued	680	2 years	$500,000
Equipment-backed	680	2 years	$500,000
Invoice-backed	Varies	2 years	$500,000

Secured lines of credit are more difficult to qualify for and have longer application, approval, and funding times than unsecured lines of credit. Business owners must have extensive operational history and relatively high annual revenue to qualify. For bank-issued and equipment-backed lines of credit, business owners must also have good credit. Invoice-backed lines of credit are sometimes an exception to those more stringent requirements as credit score plays a smaller role in underwriting.

Secured Small Business Line of Credit Rates and Fees

Type	APR Range	Origination Fee	Maintenance Fee
Bank-issued	8% to 25%	Up to 5%	Up to $500 per year
Equipment-backed	9% to 18%	Varies	Varies
Invoice-backed	7% to 20%	Varies	Varies

Secured business lines of credit can offer borrowers lower rates because loans require collateral, so lenders have something to take if borrowers default. This can be a major benefit to business owners seeking to borrow larger dollar amounts. Origination and maintenance fees vary across secured lines of credit based on the type of collateral and also by the lender.

Secured Small Business Line of Credit Terms

Type	Maximum Credit Limit	Longest Repayment Term	Fastest Speed of Funding
Bank-issued	$5 million	Up to 10 years	1 month
Equipment-backed	$25 million	Up to the useful life of the equipment	1 month
Invoice-backed	$10 million	Repaid through invoice collection	3 weeks

Secured lines of credit from a bank can be as large as $5 million, depending on the individual bank’s lending policy. Repayment terms can be as long as 10 years, but your line of credit will likely be reviewed annually by your lender. However, funding speeds are typically slower because of the higher business line of credit requirements and more due diligence for collateral. Secured lines of credit are ideally suited for businesses that do not need fast funding or are higher-revenue businesses in need of a larger credit limit.

Personal Line of Credit for Business

Startup small businesses that need capital often rely on personal financing from the business owners. A personal line of credit does not require any business information but will require good credit.

Consider the risk of using personal assets: Small business owners should thoughtfully review using personal financing for business and consider the risks of putting personal assets at stake.

Types of personal lines of credit include:

• Personal: Banks and online lenders offer personal unsecured lines of credit without consideration for business qualifications. These credit lines go up to $100,000 and are best used by startups and low-revenue businesses whose owners have good credit and require a quick capital injection.
• HELOC: Business owners and entrepreneurs can also access a HELOC to fund their business. It’s important to note that lenders base the size of a home equity line of credit on available home equity. A HELOC also puts the home at risk in the event of non-payment but offers much lower interest rates.

Personal Line of Credit Requirements

Type	Minimum Credit Score	Shortest Time in Business	Smallest Annual Revenue
Personal	720	N/A	N/A
HELOC	660	N/A	N/A

Personal lines of credit have high minimum credit score requirements because lenders will rely on this metric in underwriting. Startups and new business owners with good credit can take advantage of the lack of time-in-business and annual-revenue requirements.

Personal Line of Credit Rates and Fees

Type	APR Range	Origination Fee	Maintenance Fee
Personal	7% to 15%	None	None
HELOC	4% to 11%	Up to 5%	Up to $75 annually

Borrowing money with a personal line of credit or HELOC has the benefit of low fees and interest rates. Business owners can access capital and pay it back quickly to lower the cost of borrowing. However, business owners must make sure that they have the budget and cash flow to cover financing in case their business performs below expectations.

Personal Line of Credit Terms

Type	Maximum Credit Limit	Longest Repayment Term	Fastest Speed of Funding
Personal	Up to $100,000	5 years	2 weeks
HELOC	85% of equity in home	Up to 30 years	30 days

Personal line of credit limits can vary by lender and are typically no more than $100,000. However, a HELOC can be as high as available home equity, making it a great option for business owners with sufficient equity that need startup capital. HELOC repayment terms also extend up to 30 years, with up to 10 years to draw from the line and make interest repayments, plus up to 20 years for amortized repayment.

If you’re considering using a personal loan to finance your business, you may want to consider MuevoLoans. With its online marketplace, MuevoLoans allows you to compare rates and offers from various lenders to find the financing option that’s right for you.

Visit MuevoLoans

Pros & Cons of a Small Business Line of Credit

PROS	CONS
High flexibility	Potentially lower credit limits
Revolving credit	Potentially higher interest rates if line of credit is unsecured
Interest rates for secured lines of credit are very competitive	Secured lines of credit require collateral

Bottom Line

Business owners use lines of credit to finance recurring expenses. Business line of credit requirements vary based on whether the line is secured with collateral or if a personal line of credit is being used for business needs. Business owners should have a strong credit score, solid revenue, and established time in business, but there are options available for any business.

Economic Injury Disaster Loan (EIDL) Existing Program 

• Click Here To Apply
  Loan Amounts up to $2,000,000
• 3.75% Interest rate for For-Profit Businesses
• 2.75% Interest rate for Non-For-Profit Businesses
• Loan Terms will not exceed 30 Years 
• Collateral required is only when the loan is over $25,000
• Credit History: Must be acceptable to SBA and show the ability to repay.
• Only available in states with SBA approved declarations of disaster.  Check to see if your area is on the list, click here.
• If you receive the EIDL, you will not be eligible for the SBA 7(a) Relief Loan

*Our sources indicate that there are currently over 25,000 applications submitted so far, with at least 3-weeks  for approvals to be processed. It can be assumed that approval times will only increase as more applicants apply

Get a $10,000 Emergency Advance 

You can get up to a $10,000 grant from the SBA for your small business while you wait for your larger CARES Act Paycheck Protection Program (PPP) Loan or SBA Economic Injury Disaster Loan (EIDL) Follow the below steps:

• Go to https://covid19relief.sba.gov/#/
• Fill out the application
• On the page titled “Additional Information”, make sure to click on “I would like to be considered for an advance of up to $10,000”
• Complete application

*This grant provides an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan (EIDL).  

**If you’ve applied for CARES Act PPP financing with us, your place is safe in our queue. Although your application is on-hold pending SBA guidance, we are working diligently to complete your file for an assignment, underwriting, and funding as soon as possible.

SBA 7(a) Relief Loan (Paycheck Protection Program) New Program – CARES Act 

• Click Here To Apply
  Loan amounts up to $10,000,000**
• .5% Interest rate for For-Profit and Non-For-Profit businesses
• 2 year full payout loan, and payments may be deferred for 6 months
• Unsecured and no personal guarantee
• No minimum credit score requirements
• Eligible for loan forgiveness***
• Can only be used for payroll support including medical leave, costs related to health benefits, employee salaries, mortgage payments, rent, utilities, insurance, and any other debt payments incurred before 2/15/2020
• No prepayment penalties
• SBA guarantee fees and lender fees are waived

*A borrower with a current EIDL loan can only also receive the SBA 7(a) Relief loan if the EIDL loan is unrelated to COVID-19

**The maximum loan amount is the lesser of $10,000,000 or the product obtained by multiplying average total monthly payments for payroll costs during the 1-year period before the loan is made by 2.5. So if the loan was made on April 1, 2020, and average monthly payroll costs for the period April 1, 2019, to April 1, 2020, were $1,500,000, the maximum loan amount would be $3,750,000. Payroll amounts over $100,000 per person, will be excluded from the calculation

***Small businesses that take out these loans can get some or all of their loans forgiven. As long as employers continue paying employees at normal levels during the eight weeks following the origination of the loan, then the amount they spent on payroll costs (excluding costs for any compensation above $100,000 annually), mortgage interest, rent payments and utility payments can be combined and that portion of the loan will be forgiven. Any loan amounts not forgiven at the end of one year are carried forward as an ongoing loan with terms of a max of 10 years at 4% interest. The 100% loan guarantee remains intact.

Highlights from this housing report:

• Will the real estate market crash in 2020 due to a shaky economy?
• That’s one of the most common questions we received last week.
• At this point, it seems unlikely that the housing market will “crash.”
• But home prices might drop in some cities, especially the pricey ones.

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From stock market investors to home buyers, it seems everyone has the jitters lately. And that’s understandable. Turn on the news, any news, and you would think the world was ending. (Spoiler alert: it’s not.)

The coronavirus has shaken the global economy, causing concerns among international corporations and small businesses alike. And those concerns are warranted. 

The biggest problem in the economy right now is restricted movement. Many countries have imposed travel restrictions and “lockdown” protocols to reduce the spread of the virus. That hurts all kinds of businesses, from restaurants to airlines to hotels — even your local coffee shop.

The bottom line is that we will get through this, as we have in the past. But there will certainly be a short-term impact on the world’s economies. How much of an impact is anyone’s guess. It’s just too soon to say.

But let’s turn our attention back to the housing market for a moment. Let’s tackle the big question…

Will the Real Estate Market Crash in 2020?

Will the U.S. real estate market crash in 2020, due to economic concerns spawned by the coronavirus?

That’s a hard question to answer at the moment, mainly because we don’t know how long the situation will drag on. That’s the key factor here — the duration of the crisis. But as of right now, it seems unlikely that we will see a nationwide housing crash on the scale of the one we saw in 2008.

What’s more likely is that the real estate market will slow down, as fewer and fewer home buyers venture out to buy houses. This in turn could lead to slower home-price growth going forward, or even a decline in some areas.

The housing markets most susceptible to falling home values are the ones with the highest prices relative to median income. Markets like those in the San Francisco Bay Area, where only a small percentage of local residents can afford to buy a house, are more likely to see a downturn compared to the more affordable markets with a higher percentage of capable buyers.

According to George Ratiu, a senior economist at Realtor.com, an economic slowdown could also result in fewer home sales nationwide and a buildup of inventory. In a recent Bloomberg article, Ratiu said:

“If there is a marked economic slowdown accompanied by job losses, that would put a lot of pressure on homeowners. We would see a change in the inventory situation. Instead of a severe shortage, you would start to see inventory ramp up as people get interested in offloading.”

But the fact is, we’re not there yet. All of these outlooks are speculative at this point. Possible, but speculative. We haven’t reached that turning point, at least not on a national scale. And we might not reach that point. A lot depends on how quickly health officials can get their arms around this virus.

House Values Continue to Climb in Most U.S. Cities

According to the latest data, home prices in most U.S. cities are still rising as we approach spring of 2020. And at least one forecast sees that trend continuing over the coming months.

As of March 16, the real estate information company Zillow had the following forecast posted on its website:

“The median home value in the United States is $245,193. United States home values have gone up 3.8% over the past year and Zillow predicts they will rise 4.1% within the next year.”

Of course, these predictions are based on current trends and conditions. And those conditions are changing as we speak. It’s certainly a fluid situation. But as of right now, the economists and analysts at Zillow clearly do not see a U.S. real estate market crash occurring in 2020.

Things Have Changed Since the Last Crash

The truth is it would take a lot more than a short-term economic slowdown to cause a nationwide real estate market crash in the U.S. It would take massive job losses and income reduction, on a national scale. And that’s just not happening right now.

The U.S. housing market is not nearly as “fragile” as it was during the last crash. In the early 2000s, reckless lending practices created a ticking time bomb of unaffordable mortgage loans. People who had no business taking on a mortgage loan were qualifying with ease, thanks in part to “creative financing” products like the payment-option ARM loan.

Say what you will about government regulation and oversight, but it has certainly created a more stable mortgage industry — and thus a sturdier housing market. Mortgage default and foreclosure rates today are significantly lower than they were ten or twelve years ago.

Mortgage borrowers today are also better qualified (on average) than they were during the last housing boom-and-bust cycle. There’s more income verification during the loan process today than in the past.

Containment and ‘Lockdown’ Measures Could Reduce Home Sales, Prices

As of right now, the U.S. has not implemented the kinds of strict containment measures we are seeing in some European and Asian countries. 

Many events have been cancelled, from Broadway shows to the Boston Marathon. Large gatherings are prohibited. And an international travel ban has been put into place. But so far, the free movement of individual citizens within the U.S. remains unaffected for the most part.

If that changes — if government officials implement a kind of lockdown to restrict movement — the housing market could take a bigger hit. People would be unable to go out and look at homes. Sales would decline. This reduction in demand would slow home prices and possibly reverse them, in some areas.

At present, this is a regional fight. Some parts of the U.S. have few or no documented cases of the coronavirus right now, while other states have many. And in those affected states, the highest concentration of cases are typically centered around major population centers (but not so much the outskirts).

So if we do see a kind of lockdown implemented in the U.S., it would likely apply to select areas such as New York City — not the country as a whole.

A broader lockdown scenario would certainly slow homes sales and probably chip away at house prices in some markets. But it probably wouldn’t cause a nationwide housing market crash in 2020, unless it dragged on for many months.

Here’s something worth remembering: A virus cannot cause home prices to drop, or cause the real estate market to crash. Not directly anyway. Those things occur due to changes in supply and demand, and consumer confidence. So a lot depends on how people react to the situation.

Disclaimer: This story contains forecasts provided from third parties not associated with the Home Buying Institute. They are the equivalent of an educated guess and should be treated as such. The publisher makes no claims or assertions about future economic conditions.

Will the U.S. Real Estate Market Crash in 2020, Due to Economic Uncertainty?

The Federal Reserve announced Tuesday that it will open a commercial paper funding facility to support the financing needs of companies facing stress amid the coronavirus outbreak.

The facility will support rollovers of commercial paper, a commonly used form of unsecured, short-term debt issued to raise funds. 

With businesses forced to close and with consumer activity capped by quarantines around the country, concern has built up over previous weeks that companies will not be able to find funding to survive the public health crisis.

The commercial paper funding facility will establish a special purpose vehicle (SPV) that will purchase unsecured and asset-backed commercial paper from eligible companies as long as the paper is rated A1/P1 as of March 17. The facility would be available to companies of various industries, not just banks.

“An improved commercial paper market will enhance the ability of businesses to maintain employment and investment as the nation deals with the coronavirus outbreak,” the Fed said in a statement.

The facility was opened in coordination with the U.S. Treasury, which will provide $10 billion of credit production via its Exchange Stabilization Fund.

https://finance.yahoo.com/news/fed-unleashes-commercial-paper-funding-to-support-nonbank-companies-144710054.html