Industrial

George Smith Partners closed a $10,141,000 equipment financing loan with cash-out for a repeat client. After successfully placing two non-recourse loans on two industrial buildings for the client, GSP was engaged to help consolidate several higher interest loans on their equipment and get cash-out for re-investment. Prior attempts by the borrower to refinance the equipment with cash out on their own were not successful. Challenges: (1) Lenders are dissuaded when it comes to cash-out, especially if the request is significant relative to the collateral value. (2) Under SBA 504c, equipment is required to have a useful life greater than 10 years to qualify. The appraisal indicated approximately 35% of the equipment had a useful life of 8 years. This resulted in almost $4.6M lost in value and would have required the borrower to bring in cash to close versus getting cash-out. Solution: (1) GSP recognized the “owner-user” attributes of the borrower and how the equipment was used. They identified that the transaction would be eligible for the SBA 504c program which would allow for cash out and carry a lower interest rate. Additionally, GSP worked with an aggressive bank that was comfortable underwriting a loan secured by equipment and not the real estate (2) GSP highlighted to the lender that an experienced in-house maintenance crew was actively servicing the equipment and demonstrated that useful life would be well over 10 which increased the value of the equipment by $4,600,000 and allowed for cash-out. The bank loan and SBA loan carries a blended rate of 4.72%, saving the borrower approximately $1,000,000 in interest costs annually.