ValueXpress is often asked, “When is a CMBS conduit loan right for me and my commercial property?” The answer begins with the two most compelling benefits of CMBS conduit loans:
- All CMBS conduit loans are non-recourse, which means there are no personal guarantees.
- CMBS conduit loans allow for unrestricted cash-out on refinances in which the new CMBS conduit loan amount is greater than the loan balance being paid off.
Have you personally guaranteed your existing loan? You should be aware that in the event of a default and foreclosure, if the lender does not recover the full loan balance through a sale of the property or the loan, each individual who personally guaranteed the loan is responsible to repay the shortfall. And the lender can easily get a judgment to compel you to pay. Do you have multiple partners, not all of whom will guarantee a commercial loan? Then you should consider a CMBS conduit loan because no one needs to provide a personal guarantee.
Do you want to grow by investing in addition commercial real estate, but you are a little short on cash? Refinancing with a CMBS conduit loan can provide the cash you need to invest in other opportunities. For example, if you own a shopping center worth $10 million that is refinanced with a 75% loan-to-value CMBS conduit loan ($7.5 million) and the existing loan balance is $5.0 million, the $2.5 million of excess loan proceeds are provided to you, the borrower, without restriction on what the excess funds can be used for. Many commercial lenders do not allow for unrestricted cash-out.