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“Know Your Financing Alternatives” «BACK
KM Outlook - Observations From an Industry Leader  
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The multi-unit finance marketplace continues to develop and respond to changes in the capital markets. Below are some of our observations, key issues and opportunities to consider when financing business growth and development.

There are many types of multi-unit financing available in today’s marketplace.

Equipment: Typically a short-term (5-7 year) amortization and frequently structured as an equipment lease.

Real Estate: Cornerstone financing for multi-unit operators that typically provides high advance rates, low interest rates and long amortization.

Cash Flow: A form of financing once abundantly prevalent but currently only available to the proven operator or concept that can demonstrate consistent cash flow and profitability. Often requires a personal guaranty or alternative credit support.

Sale Leaseback: A common alternative to real estate debt financing and represents a source of significant proceeds or long term financing; however, borrower may forego right to control and ability to build equity in real estate.

Lenders in today’s market are more consistent in applying traditional underwriting criteria and requiring common terms and covenants.
  • Advance rates are currently at traditional market levels.
  • With few exceptions, lenders insist on an absolute coverage ratio of 1.25 or greater.
  • The market has refocused on tangible collateral and reasonable valuations (both in purchase price multiples and debt to equity levels).
  • Personal guaranties are again commonplace, particularly for individually owned multi-unit businesses.
The availability of multi-unit financing today and the need for flexible terms require greater attention to loan document terms and provisions.
  • With the focus on tangible collateral, the multi-unit borrower needs to pay close attention to cross collateralization and cross default terms.
  • The abundance of sale-leaseback and lease financing means borrowers need to carefully examine provisions regarding control, substitution and repurchase options with respect to their real estate and other collateral.
  • Provisions and restrictions regarding prepayment, release of collateral, assignability, and subordinate or additional financing must be considered in light of the loan term, the need for flexibility and potential exit strategies.

At Krass Monroe, we have the experience, industry expertise and networks to help you through today’s financing options and applicable terms. For additional information please call Randy Evans, Dennis Monroe or Jodie Grabarski at 952-885-5999.