Our clients already owned a Texas hotel. They were ready to purchase another Texas hotel in the northwest part of the state.
They really wanted to minimize their equity injection.
Each of our clients have different needs. Some are more rate-sensitive, some clients want loans with lenders who will become their primary business relationship. And some, like these clients, are looking for a high leverage loan.
Our GRP Capital Team worked closely with the clients. Managing Director Krishan Patel noted that he was proud of the sensitive guidance during the negotiations of the purchase and sale agreement. He also helped his clients prioritize the aspects of the new loan that were most important to them. “I was pleased that we were able to match these clients with a loan that met their needs. They have great experience in the hospitality industry. As a result, they will maximize the profit of their new hotel. Their ability to keep their equity injection manageable was a critical component of the loan. I look forward to working on other projects with them, as I know their situation and goals well.”
Best Practices for Organizing Your Equity Injection:
During underwriting, the clients worked quickly to provide evidence of their equity injection. The equity injection is the “money down”. If you are contemplating a new loan (not a refinance), here are some tips regarding equity injections.
• Sufficient equity: The lender will require bank statements or statements from stock accounts. These statements must show enough money. Just before closing, clients transfer these funds via wire.
• Dividing it Up: Typically, all of the partners participate in putting money down. Ideally, the equity injection is divided up proportionally among the partners. Most buyers contribute towards the down payment, matching the percentages of ownership.
• Clean sources of equity : Down payments need to consist of funds that are “clean”. This means that the money has not been recently loaned to you. As you are choosing which accounts will be the source of your equity injection, choose wisely. The lender will “source” any large movements of money into an account (typically more than $1,000). This means you will have to tell the lender where the money came from and often provide a statement (or several) from the source of the transfer.
Our GRP Capital team specializes in finding the right lender for each project. We save our clients time and money, as we research the best choices for their funding sources. Our experience allows our clients to find funding that is project-appropriate and will allow for sufficient cash flow. If you are considering becoming a first-time (or second or third time!) buyer, we can assist you.
- Texas hotel; high leverage; equity injection ,