When buying a house you may have seen a line in your mortgage referring to “Taxes and Insurance”. The mortgage company includes an amount each year to pay Real Estate Taxes and Property Insurance directly. This is to ensure the homeowner doesn’t – through negligence – endanger the loan.
Make sure the writer you are going with would like to ensure that any possible risks of default are covered. While there are many other forms of insurance to protect the collateralizing asset, the biggest risk is default on obligations. If your financing request is subject to a draw schedule, then most of your money will be sitting for a very long time doing nothing.
Also, make sure that the writer will, through its own internal and proprietary processes, at no risk to your financing, provide a Trade Platform that will utilize the strength of the financing to realize a profit to meet the obligations of the loan. The result, at the end of the loan period, all obligations have been met resulting in 100{afe232c3ea7dcee0a9b500e712c36ed73e0bf8021eb768210a7cfcc3f030476e} equity. Trade Platforms are not available on all financing and will be determined during underwriting.
Select a writer that only provides collateralizing instruments for its own purposes, but welcomes applicants providing their own instruments for consideration. Ask that the writer will either go with a cash-backed Letter Of Credit or a Surety Bond. Also, that they issue and provide that instrument on your behalf.
It is custom that the writer will not claim cost from you if an approval is not given for any reason. During process whereby they seek evidence to determine the viability of your transaction, if for any reason a determination is made to decline your project a full refund of the escrow is to be returned to you.
Prior to final approvals and agreements from both parties on all conditions to loan stipulations on closing contracts, the writer should not impose and should not imposed any cost involved in procuring a loan to the client. The process is clearly designed as one with no upfront or due diligence cost process. The writer will only expect to get paid when they fund a transaction, and might be willing to assume the cost if they cannot, but don’t expect it because it can be quite a costly proposition on their behalf.
In the second installment to this multi-part article on Private Equity Funding I will dive deeper into what you should look for when selecting a financial service.
