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What Does Insurance Have to do with Commercial Real Estate Financing?

By ANDREW ZINNOriginally published in the Los Angeles Business Journal Insurance may be one of the more complex and overlooked areas in commercial real estate financing. Typically, banks require borrowers to obtain some level of insurance to cover the value of the improvements being financed. Property and liability insurance policies are lengthy and their review is even more monotonous than reading the reams of paper produced by a bank in the form of commercial loan documents. Just like your loan documents, one should pay particular attention to the defined terms and exclusions in an insurance policy. The definitions and exclusions are the key to unlocking the scope of your coverage. One of the key exclusions you’ll find with standard property insurance policies is for pollution. Introduced in 1978, environmental insurance was first developed to fill the insurance coverage gaps created by pollution exclusions in liability and property insurance policies. Because the definition of pollution may be subjective, ...

Family Businesses Can Learn a lot from Each Other

Family-owned businesses in the United States are as common as hometown parades and picnics on the Fourth of July. Family-owned businesses, like the one where I work, represent 80-90% of all businesses, and generate between 40-60% of Gross Domestic Product (GDP). We exist in all shapes and sizes, from small corner stores to huge companies, with over $100 billion in revenue. We also face common opportunities and challenges that are different from publicly-traded companies, such as managing intra-family conflict, shareholder control, distributions, and engaging the next generation. Yet, despite our ubiquity and common opportunities and challenges, far too many of us treat the issues we face as family-owned businesses as if we’re the only ones to confront those issues. Our isolation in addressing these challenges is reinforced by the lack of well-known resources regarding these topics. Many of you might be able to name several good books about how to be a great leader, but how many can name a good bo ...

Business Owners Should Consider the Benefits of Purchasing Versus Leasing Commercial Real Estate

Frank Tapia, Vice President,Business Banking Originally published in the Long Beach Business Journal Often, savvy business owners need to evaluate if the existing property they’re located in is right for their long-term business needs. This can certainly be the case if the business has recently experienced growth or needs additional locations in order to do so. Since all situations vary, each business owner must determine if renting or owning a commercial property makes sense for them. Although many may realize it’s preferred to purchase a home rather than rent, many may not realize that paying a commercial mortgage can also be more reasonable than renting. In fact, in a recent analysis, it was estimated that it could cost 86.6% more to lease vs. purchase a commercial real estate property over a 15-year occupancy period*. In fact, one of our valued clients, a retail store with the same location for the past seven years, consistently grew each year. Of course, with each passing year, they were outgrowing t ...

In Commercial Lending, Not all Transactions Fit All Lenders

By Tom Lynn, SVP, Senior Group Manager, First Bank Commercial Real Estate Originally published in the San Francisco Business Times Since there are so many variables in commercial real estate (CRE) lending, not all transactions fit all lenders. This raises many questions for investors and developers who are seeking financing. As a trusted advisor, some common questions asked by many borrowers are: When seeking a commercial real estate loan, what’s your typical deal size? Deal sizes are dependent on the size and risk tolerance(s) of the lender. For example, at First Bank, the size of loans generally don’t exceed $15MM, although exceptions can be made. • What types of properties do you finance? Most real estate investors and developers want to purchase properties like office buildings, industrial properties, retail space, residential developments, and storage buildings. Often, lenders will also provide financing for specialty niches like churches and senior care facilities. Alt ...

The Right Banking Partnership Can Help Determine the Success of Your Privately-Owned Business

By KAREN BROWN SENIOR VICE PRESIDENT, COMMERCIAL TEAM LEADER Originally published in the San Francisco Valley Business Journal Of course, we all know in order to be successful in business, you need to have the right people in place, the right product or service, and the right price. Did you also know it’s essential to have the right strategic banking partnership? Certainly, any bank can open accounts, accept deposits, and generate loans; however, it’s the banking partnership and holistic relationship that truly can have an impact on the long-term success of a business, especially those that are privately-held. In fact, a recent survey* indicated that business owners reported the highest level of satisfaction with client-focused banks and those that are deeply-rooted in the communities in which they serve. Within the survey, 80% chose a client-focused bank over the larger-scale banks (61%) and online lenders (46%). In business, relationships—including the one you have with your ban ...

What’s the Value of Having a Meaningful Working Relationship with a Banker?

By Greg Hahn, Commercial Loan Officer, S. California CommercialOriginally published in the Orange County Business Journal Having access to various banking services is essential; however, having a relationship with a dedicated banker could mean a lot more to business owners than expected. Be a business partner. Most commercial banks have dedicated relationship managers that work specifically with business owners. Banking services are evolving regularly, making it difficult to stay updated on what latest services are available. An experienced relationship manager will get to know their business clients’ needs, recommend new products and services to enhance daily operations, making necessary adjustments to meet changing needs. Provide sound advice. A business owner’s relationship manager should periodically be reviewing financial statements, while noticing positive and negative trends that the business is experiencing. This is valuable information as it could potentially help avoid financial prob ...

Trouble Finding the Right Bank? Tips from a Banking Insider

By John Marder, Senior Vice President, C & I Commercial Lending Originally published in the Orange County Business Journal Recently, I was given a great opportunity to show just what I can do as a relationship manager and what we can do as a bank. The owner of a distribution company I was recently introduced to said, “I liked the guy at the other bank that came out to see me but I gave him my financial package and, after three months, nothing ever happened.” Does this sound familiar? Let me give you a few tips on how to best avoid this scenario if you’re looking for a commercial loan or line of credit for your business, or if you are a trusted advisor helping your client through this process. Don’t just rely on one lender. It is helpful to shop a small, medium, and large bank to see what each has to offer. Realize a good offer can take time, so ask how the process works. You should get a pretty good indication of how the bank will view your company within ...

For Long-Term Success in a Family Business, Think Like a Farmer

By MICHAEL DIERBERG, Chairman of the Board, FB Corporation (First Bank) For those of us who live and work in cities, the world around us is the here and now. Everything is new. We work in office buildings that are probably younger than most of the people working in them. The tools we use to do our jobs didn’t exist 10 – 20 years ago. We use things and then discard them. Given our surroundings, it’s not surprising that often our perspective is narrowly focused on what is directly in front of us, or the here and now. Contrast that with the perspective of a farmer. The farmer may live in the same home that his or her grandparents or great-grandparents built. Likewise, the fields and barns have been passed down and tended to by generations before. At night, the farmer has a clear view of the sky as a reminder of a broader picture beyond that day’s activities. All of this leads to several traits that are common in the farming community: appreciation and respect for the contribution of othe ...

FIRST BANK WISDOM®: A goal without a plan is just a wish.

MICHAEL LAW, Senior Group Manager, N. California Commercial p: (925) 746-2805 e: Michael.Law@fbol.com Firstbanks.com Although economic optimism is high, so are interest rates–at least from what we’ve enjoyed in the last few years. The Federal Re¬serve has already raised rates twice since December 2017, with more increases predicted in the near future. If you refer to the graph, in the last decade, rates have remained fairly steady and flat. As the economy improves, the Federal Reserve raises rates to stay in step with inflation. This creates what is known as interest rate risk. Investopedia defines interest rate risk as “the risk that an investment’s value will change due to a change in the absolute level of interest rates or in any other interest rate relationship.” As a business owner, you may be asking how this impacts your business, your cash flow, and your overall monetary strategy? Obviously, as rates continue to rise, so will any variable rate loans. If you consider t ...

Never Let the Size of Your Business Get in the Way of a Big Opportunity

Originally published in the San Francisco Business Times. Written by Tom Lynn, Senior Vice President/Senior Group Manager If your business has experienced growth, you may be considering office expansion or additional warehouse space. Or, have you decided to broaden your investment portfolio with acquisitions for owner-occupied real estate or commercial investment property? Regardless of your situation, you may have questions concerning the commercial lending process. As interest rates climb, this may be the perfect time to finalize those plans to take advantage of current borrowing rates. As your trusted advisors, we want to share some of the more common factors that are part of the consideration process when securing a commercial real estate loan: Financials. Like any loan, your financial information is crucial, so have this available, including a current balance sheet, income and expense statement (including real estate schedule, if appropriate), and three years’ worth of tax returns. ...

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