600 Whitehead Street, Key West, Florida   33040

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Preparing Your Business for Refinance

A.  Uses of financial statement.

  1.   Profit & Loss (P&L), Income & Expenses
  2.   Balance Sheet (Assets, Liabilities Equity)
  3.   Cash Flow - Whence (from) - Thither (to)

B.  Past vs. Future Performance

  1.   What was accomplished, missed, and why?
  2.   What will be accomplished, when, at what cost?
  3.   EBITDA - Earnings before interest, taxes (corporate) depreciation (regular & Section 179), and amortization.
  4.   Capitalization ("cap") rate equals net operating income (N.O.I.) divided by the asset's value or selling price. The
  5. lower the cap rate; the higher, the value. Examples: At 4% cap rate, a $300,000 net cash flow indicates value of $7.5M.

    At 6%, a value, a value of $5M.


C.  Ways To Save

  1.   Simultaneously issued (S.I.) title insurance.
  2. Because only an owner's policy (not a mortgagee's or lender's policy) offers a re-issue credit and because a new owner's policy costs usually a minimal($200-$250) additional fee - obtain a new owner's policy along with each new mortgagee's policy whenever amount of new refinance exceeds amount of old owner's policy.


    For $1M new refinance, A's premium is based on $200,000 prior owner's policy and B's is based on $800,000 prior owner's policy.

     

        A

        B

    Savings

    Policy Charge:

    $4,630

    $3,430

    $1,200


  3.   Assignment rather than satisfaction of old mortgage.

Major loan costs are (a) documentary note at rate of $0.35 per $100 multiple or fraction, and (b) intangible at rate of

$2 per $1,000 (or $.002). Examples of satisfaction compared to assignment, followed by modification. Note that this requires approval from old and new lender.


Based on $800,000 Old Balance and $1M New Loan

 

Satisfaction

Assignment $200,000 (New Money)

Due Note:

$3,500

$700

Intangible:

$2,000

$400