As published in Scotsman Guide's Commercial Edition, July 2010.
With the continuing credit crunch, increasing property foreclosures and tighter mortgage-underwriting standards than in recent years, commercial mortgage brokers often must help their clients find creative ways to meet lenders' requirements and prequalify for loans. One common area of concern for commercial mortgage lenders is borrowers' cash flow -- or lack thereof.
Brokers can help their clients understand how to increase their property's cash flow -- and therefore, their chances of getting a loan -- through a cost-segregation study.
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When borrowers have access to substantial cash flow from the start of the transaction, lenders often feel more confident that they are bankable and can repay the debt. As such, clients' cash flow is one area to which commercial mortgage brokers should pay particular attention when prequalifying potential borrowers.
When lenders evaluate potential loans for approval, tax depreciation typically is not part of the equation. But by employing a cost-segregation study, which speeds up tax depreciation on borrowers' property, borrowers can face a better net cash-flow position. This can make a deal more fruitful for lenders and borrowers alike.
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