This program is with our Canada-based lender. For clients with a specific project to finance or have a series of projects that can be approved through a funding pool, the 4-1 Loam Program can provide a Credit Facility of up to 4X the client's Initial Funds Amount.
1. It is a non-recourse loan and can be used for any type of commercial development, as well as many other types of non-RE projects (refer to suitable programs).
2. 20% deposit is required for each project; the minimum deposit is $1 million (USD). However, for the 4-1 Loan Program, the client must have a minimum of $10MM USD in CASH ($12.5M USD if you are keeping your funds in your own account) pledged to your project as the "Initial Deposit." The lender still has a loan option for clients under the $10M; however, they typically are a 1-1 on their capital.
3. Please note that the loan multiple will ultimately be determined at the underwriting stage based on the project. The multiple offered could be anywhere from 1-1 multiple, to a 4-1 multiple. In general, deposits under $10M see a 1-1 multiple, and deposits under $100M will most frequently see a 3-1 multiple. Those deposits that are $100M or greater, can be offerd a 4X multiple.
4. The lender will provide the balance of the 80% required for the project.
5. The general term of the loan is 4 years; the lender is flexible for extensions.
6. Interest rates are at the GREATER OF a "Flat 3.5%," or 1 Year LIBOR +2 (whichever is higher at the date of signing of the contracts); interest-only, with interest paid quarterly.
7. Interest is charged only on funds drawn from the loan.
8. The client always keeps their "Initial Deposit" capital in "safe-keeping", where these funds are never exposed to any risk.
9. "Initial Deposit" would remain in the client's own bank account if it is $12.5M USD or greater; for amounts under $10MM USD, it would remain in the FEDERAL RESERVE BANK. The funds are fully insured dollar for dollar. This is governed by DEPOSIT AGREEMENT which will exist between the client and the lender.
10. The project is then funded per the monthly drawdown schedule that is agreed to by both parties (and the lender's insurer) as part of the Loan Contract.
11. Projects are completed as per the schedule, and the client may execute any of the four (4) Repayment options as outlined below, at the client's sole discretion.
12. Four (4) options: (a) Pay-off the loan as per the Loan Agreement; (b) Renew the agreement for up to 48 months under the same terms and conditions as the original agreement; (c) Convert all or part of the outstanding debt to equity in the project based on a previously agreed-upon formula; (d) Convert the outstanding debt to a long-term mortgage.
13. Exit Strategy can be refinanced or sale of the asset of several other options.
14. The lender offers the same Line of Credit program to governments and government agencies with an interest rate of 1% and a term of 4 years.