Depending on the complexity of a real estate project, financing can come from many different sources. Collectively, the sources are often referred to as the “capital stack” where “stack” is an appropriate metaphor because each source comes with its own collateral, return expectations, and repayment priority. While there are many shades and variations of each, the Capital Stack typically consists …
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Understanding Personal Guarantee Structures
Unless you run a large company with an established track record of repaying loans, a bank will likely ask for a personal guarantee before approving a commercial real estate loan. What is a personal guarantee? In this article we’ll thoroughly explain personal guarantees by covering the following: Definition of a personal guarantee When personal guarantees are used Personal guarantee types …
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30/360 vs Actual/360 vs Actual/365: Loan Accrual Calculations Explained
In a former life, I helped banks install loan servicing software. In every installation, there came a point where the bank would have to decide which accrual method to use for its loan portfolio. When we got to this point, the Loan Operations manager would always turn to me and say, “what’s the difference between 30/360, Actual/360, and Actual/365, and which one should we go with?” Although …
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