I am trying to start a business in the area of real estate development. I will require approximately two million to build the first units in this development. I have no personal capital, but because of the nature of the project I am able to come up with $100,000 in government grant money. Would a bank be likely to loan the balance of what is needed to break ground on my business? Would a commercial lender consider a loan of that amount, without grant money involved, in the down payment? We could definitely use the grant money for setting up our office and handling a lot of associated expenses. That would mean the lenders money would only be needed to finance the real estate itself.
While we won't pretend to speak for all banks or commercial lenders, five percent down of the government's money, would not be sufficient for a $2,000,000 loan. Today's real estate market is still volatile and still declining in some areas.
What is not known in this equation is the area, the needs your project will meet and the cash flow that is anticipated to service the debt. These are things you need to discuss with a lender. It would appear that your investment would be your idea and energy. Most lenders also want to see your cash in the deal. A lack of equity in the project is a serious flaw.
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While we won't pretend to speak for all banks or commercial lenders, five percent down of the government's money, would not be sufficient for a $2,000,000 loan. Today's real estate market is still volatile and still declining in some areas. 