This application for a loan to buy commercial property, came from a Dj and Restaurant employee in Hanford, California. He wants to buy an old building that used to be leased to an Applebees Restaurant, and is on the brink of being torn down. The building didn’t sell in a recent auction, and our budding (sort of new) entrepreneur wants to snap it up.

The business plan is to use the building for his own special restaurant. He plans to be open for business from the early hours to late at night. He wants to have live musicians and talent in the evenings, serve a dinner menu, breakfast menu (coffee and donuts), and lunch menu.

The applicant has stated that his credit rating is poor, which would certainly cause his interest rate to be higher than ideal. We won’t investigate this as a lending institution would, but we will do some math on the applied for mortgage.

Type of Loan (sorry – need it again) :: Mortgage Loan for Commercial Property

Why do you need a loan? – Explain in detail ::To purchase a commercial building for a restaurant, bar, and lounge. This building is perfect for a restaurant because it was a former Applebees Restaurant.  Its has been appraised at over $350,000. The appraisal information came from the auctioneer but the building didn’t sell.  If I can secure the loan I will offer the owner $100,000, and have the start up capital.  I believe the offer will be excepted because he will be relieved of property taxes.  The auctioneer stated that if building doesn’t sell soon, it will be demolished.

If for Business, tell us a little about your business :: I have been a Disc Jockey and Karaoke host for many years and once leased a building in the past. The owner took it back after I made a losing business successful, and I even had a lease  – BUT in California it doesn’t mean much with our court system. 

In this business I will sell food like; pizza, subs, fish, hamburgers – low cost, but profitable.  Specials on tap beer can be very profitable too.  In the mornings; I have experience with donuts so I will have fresh donuts, coffee, and soups on the menu for seniors.  Also, I will provide live entertainment because the area offers none where the building is located.

How Much Money Do You Want To Borrow? :: Between $150K – $200K

Length of Employment :: Under 6 Months

Time at Address :: Over 5 Years

Age :: Over 40

Extra Info Here – anything else that would help us get your loan approved :: The building would be worth more than the loan after complete. The building was fully operating when they just shut it down, so not too much remodeling needed to get started for business.

Sex :: Male

Marital Status :: Single

Ever Claimed Bankrupcty? :: No – never

What State, County, City, or Town is your primary address in? :: Hanford, California

Have you pulled your credit report lately? :: No

Would you consider your credit rating to be? :: Poor

Collateral? :: Yes

Down Payment? :: No

Do you a have co-signer or co-borrower? :: No

Employment Industry, Title, Experience, Background :: I have managed Nightclubs, a McDonald’s Restaurant. I have had a security clearance for a company that did contract work for the United States Federal Government. I have also worked for Donut shops, and have been involved in promotions for many years.

Compound Interest of Commercial Property Mortgage – 7% APR – 30 Years

We will consider this mortgage using a compound interest calculation for an amortization schedule. This is the loan request;

Principal Mortgage = $200,000
Interest = 7%
Payment Schedule = Monthly
Years = 30

Results of Commercial Mortgage Loan

Principal borrowed: $200,000.00
Regular Payment amount: $1,330.60
Final Balloon Payment: $0.00
Interest-only payment: $1,166.67

Total Repaid: $479,016.00
Total Interest Paid: $279,016.00
Annual Payments: 12
Total Payments: 360 (30.00 years)
Annual Interest rate: 7 .00%
Periodic interest rate: 0 .5833%
Debt Service Constant: 7 .9836%

Total interest paid as a percentage of Principal: 139 .508% – This is the key number. So can see that the loan on the mortgage would be just over $1300. It’s viable as long as our applicant DOES have the start up capital for renovations, hiring of staff, licensing, initial stocking, etc. If the debtor/restaurant owner and operator is successful in turning a health profit.

Would you approve this loan?