The Dirty Truth about Gap Funding!


What is Gap Funding?

It’s a term that’s used very loosely.

To some, it may mean that they are looking for additional capital to “gap” a loan. However because this is such a rare occasion, most have no idea what this means.

First of all, when people seek gap funding, they don’t realize that they are alerting the lending community that they are not liquid enough to do their deal. This is already a red-flag!

Who gets Gap funding?

Gap funding, when used in the sense that I referenced above is reserved for operators and investors with prior experience flipping properties. This means that lenders want to see that you were on the HUD or Settlement statement, not just participated on the deal.. this means you have to prove your exits.

Also this experience has to have taken place within the past 1-3 years. They want you to have current knowledge of the challenges of fix and flipping before they trust you with a no-money-down transaction.

They also want to see that you have “reserves”.

This means that once they make the 100% loan to you, which includes their expensive gap capital contribution, they want to see you how you will make those payments!

If you expect them to cover all of the rehab, construction, holding costs and selling costs, the deal has to have lots of REAL potential after remodel value, prove this by having supporting comparables.

The subject will have to be in the best areas, and you need to know your rehab budget, and get it confirmed by a contractor and his proposed team. Get each trade’s bid verified if you must. This will allow you to prove the feasibility of the project. The lenders actually want to know what materials, how much labor, hours needed to complete the deal, etc.,

Gap Funding behind another Lender?

This is the usual request, a prospective client goes and gets a 1st loan quote with a “gap” that they need to find somewhere.. anywhere ! Many times the down payment is not sourced and doesn’t need to be seasoned.

The general answer is NO.

  • No because the lenders don’t know each other.
  • No because the lenders don’t know you.
  • No because I don’t know you.

Real estate is a relationship business, and a joint venture (which is what you’re proposing) is akin to a marriage, and it takes a bit of dating, and lots of trust to create that environment.

In a short answer, forget about it.

Do you have recent experience? And you need gap funding? Why?

Lenders wonder if you have a problem managing money, managing your team, managing the rehab process, or who knows right?

They ask themselves if you have recent experience why would you need gap funding.

You should be prepared with answer and Letter of Explanation to calm these concerns.

A.R.V Lending

ARV = After Repaired Value

In cases when you find an awesome opportunity, some lenders will use a formula – they add acquisition cost, plus the rehab cost, plus the closing costs, and then divide that number by the expected retail price, it gives a number, that percentage is your % of ARV, generally they max this out t 75%.

Example = $650,000 purchase price + $100,000 rehab, 8-9% closing costs = $117,000 = $867,000. Divide that by the expected retail price of $1,300,000 = 66% of ARV.

If you landed that deal above, an ARV, asset-based lender may be interested in working with you, provided you have experience with this level of flip.

That brings me to another point. If you have history of flipping $100,000 homes, but suddenly want to flip a $1,000,000 home, you may meet some resistance. Not only does the expectations grow larger, but the LTV’s get smaller, which means that down payments go up, you may then have to bring in 10%.

Alternative Funding to Gap your deals

My advice is that you consider the following alternative funding methods we’ve used to help investors get deals done.

In order to get funding, you have to be coming from a position of strength. This means you should have good credit, in this case I mean 700 fico scores. If you have a business with revenue even better, having assets that can be leveraged and possibly earning income sweetens the deal!

Unsecured Personal Funding

This can come in the form of credit cards, credit lines, from a variety of sources. These have different terms including 0% interest for an intro rate to induce you to use the credit, or 8,10, or 18%+ right off the bat. You can stack this funding up and settle around $250k, which is probably 6-7 different tradelines, with major banks like B of A, Chase, PNC, Barclays, Navy Fed, Penn Fed, Discover, PayPal, and many others. Of course, every tradeline will suffer you an inquiry, of course, this fall off or can be removed for a fee.

Business Term Loans

The business term loans are also for 700+ fico scores across the board, you will need to claim $50,000 in personal taxes, if you qualify – the rates are around 6%-9% depending on your credit profile. The term is 5-7 years. We can raise up to $500,000.

Cross Collateralization

If you have existing assets in your portfolio, these can be residential or commercial, they should have some equity, perfect if they are long-term holds. You can add extra leverage to your purchase by allowing the lender to place a lien on additional assets. This compels the lender to move forward with the loan because you’ve reduced the risk and shown good faith.

Revenue Loans

If you have a business and you earn income, you may be able to leverage that and get a lump sum that you can use for gap funding your deal.

Friends, Family and OPM

This is the hardest source of capital to get, but it would likely be a better choice than shopping for a 2nd lien, often they won’t require so much paperwork, and probably won’t require a 50/50 split, saving you a bunch on the back-end.

Creative Financing

Today we need to be fully educated and aware of the many alternative funding options available, or know someone that is!

Sometimes funding a 1st or 50th transaction requires someone with the resources and experience with structuring multiple funding rounds to achieve a goal.

I will be ready to hold your hand to get you through your first flip or purchase of a rental property, or refinancing of a portfolio or project that is about to balloon, or you just want to explore new terms, it’s no risk! I never charge consultation fees to quickly go over a loan scenario or help a borrower through the process.

If you have an interest in real estate investing, flipping, or in the market for a loan, please contact me.

Wholesaling and Flipping

Many people start off wholesaling properties – this is another term that is often used freely and could mean many things, but for this article, I’m referring to finding sellers and properties listed with agents and matching them with your investor and buyer lists to earn marketing fees for facilitating the transaction.

Investors AKA check-writers need “boots on the ground” in order to drive leads for analysis. This builds their funnel, you keep a flow of target properties coming their way, they’ll reward you with fees of $1000-$10,000+ depending on the deal and the principals.

Using my old-school approach and combining this with technology and tools, you’ll learn to structure deals from on-the-job training, but I’ll be here to answer your questions and hold your hand.

Private Lending Consultant Flight School

I offer mentoring – in these formats: Live, and on your schedule, we’ll have phone calls and Zoom screen-shares, you’ll get lots of resources including documents, templates, marketing and full instructions. Tactics that work in today’s market! You can get more info here.

Private Lending Success Video Course

I’ve Pre-recorded 6 modules that will teach you the basics and tricks I use in private lending, perfect for real estate agents, loan officers, real estate wholesalers, even those looking for another source of income. This course is short – 4.5hrs, and will teach you how to use a mobile phone to launch an extremely effective and powerful marketing campaign.

Download Private Lending Success Ebook FREE for a limited time!

Visit this link and confirm your email and receive the PDF

You can register for free on my pre-launched site Lender Tribune

Or if you want to pay a few dollars, go over to Udemy and sign up there.

greg@fixandflippers.com

323-632-3279

Commercial Lending and Business Funding Programs.


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We have  30 years of commercial lending relationships, including but not limited to-  no doc to full doc programs,  440 credit  to 850 credit borrowers, we have bank money rates to soft money rates to hard money rates We use the financial strengths you provide to get you the best credit facility you can qualify for.

Questions to Consider

 Let’s start with a few questions to determine what business loan programs are available for you. you can borrow as little or as much of the capital that is available to you.
1. What type of business are you in?

2. How long in business?

3. Annual gross sales?

4. Can your business provide tax returns, show net -profit at year-end? Do you have personal tax returns showing net income?

5. What are your personal credit scores?

6. How many loans do you have out now? Debt schedule

7. Do you own real estate, equipment, accounts receivables?

8. Any previous defaults on loans? any bankruptcies? any tax liens?


With the above info, we will know how we can help you, please see below and attached for some of our lending programs.

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Commercial Real Estate Loan Request

Few questions

1. Is this a purchase or refinance?

2. Personal credit scores

3. Debt schedule?

4. Use of funds/Loan request

5. How much cash down on the purchase?

6.  Construction cost breakdown?

7. As-is value today vs after repaired value?

8. Exit to our loan? sale or refinance

9. Income from the property?

10. Projected income from property?

11.  If Land are entitlements completed?

12. Personal financial statement, possible cross collateral?

13. Experience?

14. If refinance, when did you buy, for how much $, any improvements made to date?

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We  offer speed, INTEGRITY, Reliability,  30 years of industry knowledge, and we love bank turndowns,

  • Business Term loans up to $25,000,000- Subject to cash flow, noi, time in business, credit as low as 660+-, deposits, liabilities, full doc
  •  Purchase order financing and contractor materials financing to $10,000,000.
  •  MCA/ACH consolidations
  • Commercial Real estate  bridge loans, Hard money, soft money,  land,  DIP,  renovations, etc  (1003 attached)
  • USDA loans to $10,000,000 6. Factoring, receivables, A/R- financing to 95% LTV
  • Inventory capital funding.
  • Equipment leasing one-page application  to $150,000. 620 scores, full doc TO  $10M- equipment sale-leaseback
  • Partner buyout to $5,000,000 to 100% of acquisition subject to DD and 1.25 DSCR .
  • Cash-flow Revenue Loans / ACH/MCA- credit as low as 440
  • Fix n Flip – to 90% loan to cost and up to 100% loan to cost on renovations  and  up 75% ARV with 80% of today As-Is Value
  •  Fix and Rent, to 75% loan-to-cost rates from 6.50%
  • SBA Programs: Our provider is a direct SBA portfolio lender with very efficient timing to close, we have 1.15 DSCR (others 1.25 DSCR)
  • Direct relationships with commercial real estate institutional take out lenders for stable properties, bank rates.
  • Apartment Financing (Affordable Housing) to 87% LTC as low as 3.78 % rates
  • LBO for qualified buy-out transactions with EBITA and assets to secure financing, seller subordination etc.
  • Accounts Receivable to 95% of invoice as low as 7.5% annual % rates** VERY STRONG COMPANY**
  • Import capital –  Capital Group to provide SBLC to $100,000,000  and logistics with warehousing, for approved transactions. (ie; order for  machine parts from China,  whereas client, needs capital to secure order,  with product sold to USA car manufacturing, SBLC could be provided.)

Unsecured Business  Credit lines, Term loans,  and Bank cards based on 680+ Credit scores

  • Start-ups ok, No income Required
  •  Seasoned High credit limits – with low utilization- low inquires for max leverage 
  • Like “Internet Pawn Shop”– We can liquidate Autos, gems, art, lender takes possession of the asset. You get Cash Fast!
  • CREDIT RESTORATION – No up-front money due – Negative items deleted in under 21 days,  payment due when negative items removed!
  • Federal Gov’t contact Mobilization capital for Seasoned and startup contract holders will be reviewed. Bank product full doc compliance.
  • High-risk merchant processing available.
  • NEW  FIX N FLIP- TO 100% LTC – including, fees, points, interest reserves, renovations, Joint Venture – Requires Experience and Location approval

NEW Vacant Commercial buildings can be financed based on  future market rents- to 80% LTV-  rates as low as 7.25 % with 720 credit

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NEW   1-4 units  SFR  Investor – Can be vacant – Non-owner occupied – to 80% LTV, rates as low as 6.5% with 720 scores and market rents.

  •  Accounts Receivable – No- Redirect, Non-Notification, No lockbox, credit lines.
  •  Equipment Sale Leaseback – No documents- No tax returns, no min credit requirements, only new appraisal forced liquidation value.
  •  Construction Mobilization Capital, Purchase order mobilization capital, Materials financing for construction jobs.
  •  Equipment Sale – Leaseback – No Credit requirements, No Financial covenants, No doc, Stated, up to 75% of forced liquidation value, new appraisal, and inspection required.
  •  No redirect, non-notification, no lockbox required credit line for accounts receivable
  •  Foreclosure Bailout for Commercial Properties 
  •  Inventory capital, financing against free and clear owned inventory 
  •  Start-up Capital – Unsecured- 680+ Credit, Stated and Full doc- 
  • Unsecured Term Loans, Credit lines, Monthly payments, Installment Loans, Start-ups ok, Credit score 680 and up


Please provide what is pertinent to your file- the more you can prove the better the rates, terms, leverage.


 To get Business Capital Funding

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1. Fully complete the Application, all questions with wet signatures.

2. 6 months bank statements, all pages, including any merchant processing, if seasonal 12 months bank statements

3. list of all advances and loans with payoff statements

4. list of all receivables, aging report, collection report

5. List of all equipment, when bought, for much money, and total liquidated value, serial numbers and model numbers.

6. Inventory, when it was purchased and for how much money, with sell-out value.

7. Profit and loss, Year-to-Date and Balance Sheet

8. Provide your credit scores, Try IdentityIq.com or MyFico.com to get your 3 bureau credit report.

9. List any financial problems, and previous turn downs, any bankruptcies, judgments or liens.

10. Provide a simple explanation letter for the use-of-funds and how this capital will improve your business.

11. Prove you have 2 years in business and with personal tax returns.

12. Please list of all your real estate holdings, when bought, the value today, any debt and leases.

13. Complete a personal financial statement.

14. Address any additional conditions that will be requested with a term sheet.

15. Invoices for new equipment purchases, or commercial real estate expenses.

Documents Needed

  • 1003 application 
  • bank statements
  • profit and loss
  • leases
  • rent roll
  •  use of funds
  •  loan request
  •  resume
  •  the credit of all borrowers 
  •  when bought and for how much and any improvements
  •  appraisal
  •  PFS- personal financial statement
  •  title report
  • . list of all debt
  •  PURCHASE  SALE AGREEMENT 
  •  PERSONAL TAX RETURNS AND IF TAX RETURNS AVAILABLE ON PURCHASE
  •  Soils report – If hard money or bridge EXIT
  •  Any construction or renovation budget
  •  IRS PAYMENT PLAN (if applicable) AND IN GOOD STANDING

 www.privacyguard.com  or www.experian.com  for 3 SCORE REPORT

Greg@FixandFlippers.com

Contact me to get started today!

New Unsecured Funding Programs, Just in Time for the Holidays!


We have multiple unsecured funding options available:

Program #1

I’ve had success getting people credit cards and credit lines in excess of $180K in 10-15 days. these come in various amounts from $1000-$50,000, can come in cards, credit lines or hard checks mailed to your home to be deposited in your bank account! Some intro rates are 0% APR for 12 months to incentivize you to use the cards, some start off at 26%+. We don’t ask for financials, bank statements, tax returns or proof of income!

Minimum loan is $30,000, max is around $300,000.

Customers have used these funds for real estate purchases, commercial properties, down-payment, EMD, reserves, etc.

We also have our own credit card processor to facilitate the liquidation of credit lines/cards.

We also have “Equifax” only financing, if that score is 680+, we’ll use it.

No business plan is needed!

Prior bankruptcy must be over 5 years, no open collections.

Can’t use CPN’s for these loans.

Program #2 – Business must have 2 years operation, must own real estate, they can give a 2nd or 3rd mortgage, 10-21 days – Have to have cash flow, Above 500 Fico.

Program #3 – Must have good credit w/Biz tax returns – 680+ fico, have Profit & loss, 6 months bank statements, 2 years personal statements, up to $1M in revolving or term funding. No upfront fees, no underwriting fees, back-end points.

Program #4 Must have a good corp, in good standing with history &  stellar credit, but no tax returns, but servicing $500k in debt currently (strong credit profile) there is a 37 point checklist which checks for registrations, database entries, etc. which we can consult on.

Need 740 Fico, This is a stated assets and stated income program. Takes 21-60 days to complete the 1st round of funding. 1st round is $150k-$250k

Visit www.GetUnsecured.com TODAY to get started!