How will the term and rates differ from a conventional Bank loan?
Keep in mind that all commercial loan term and rates depend on several underwriting factors including loan-to-value (LTV), debt service coverage ratio (DSCR), property usage (if included in the sale of the business), type of collateral, and the borrower’s financial strength. Typically, a Bank loan will be about the same length in term as a CINC Capital loan which is five (5) years. The interest rate is fixed during the term of the loan and is favorable plus competitive. A bank interest rate is typically based on an index like Wall Street Journal Prime, Libor or Treasury plus a margin which could fluctuate significantly over the term of the loan.
Can you have 2 loans for one acquisition? (1) a traditional Bank loan and (2) a CINC Capital loan outstanding at the same time?
Yes. Some banks are not able to lend the full amount of capital you need for the acquisition so CINC Capital can lend the remaining funds to facilitate the transaction and will take a second position behind the first lender or buy a portion of the bank’s loan to facilitate a transaction for you. We have more flexibility than banks since we are lending our funds. Banks have several layers of both internal and external regulations to meet. These regulations originate from both federal and internal guidelines.
Do you require the community association management company obtaining the loan to change software or banks if they are not presently one of CINC System’s customers?
There are two options. (1) Convert to CINC Systems and a partner bank with more a favorable interest rate on the loan or (2) a higher interest rate and not convert. We do allow considerable time to make the software and bank transition with as much as to 9 months. Every time our client has indicated the decision was a no brainer and converted.
May I have more than one loan outstanding at a time?
Yes you may. In fact, we expect you to have several loans as you become more comfortable and successful with acquiring companies.
Will you refinance an existing loan from the seller or a bank?
We will, in-fact our very first loan at CINC Capital made was to refinance a seller’s note.
Is there an advantage to get an SBA loan versus a traditional bank loan?
The length of the loan can be longer and up to 10 years. The equity or down payment is 10%. Typically, SBA accepts a higher loan to value than most conventional lenders.
Do you assist in preparing an SBA package for submission for an SBA loan?
We do and we have close relationships with several national lenders that are quite familiar with the HOA industry.
Why should I use CINC Capital to borrow money? Won’t a bank lend me all I need to for the acquisition?
Banks require a “margin of safety” when lending. The margin of safety is in the form of hard collateral (real estate, machinery, equipment, etc.). Community association management companies typically have few to no assets to pledge as collateral or have already pledged the assets on other loans. Community association management companies also have very short-term service agreements/contracts offered as collateral for the loan. All the above factors will reduce the amount a bank will lend for the purchase of another community management company.
How much equity or down payment does CINC Capital require?
Is there a repayment penalty if I pay off the loan early?
How long do I need to be in business before I apply for a business acquisition loan?
CINC Capital looks for the business owner to have operated a community association management company for a minimum of five (5) years or has been in the industry for 10 years.
How long does the process take to obtain a loan decision?
Once we have the full loan package, we have an answer within days not weeks.