<ul>
<li><p>The United States Small Business Administration provides partial government backed financing to small businesses. While the loans are not directly lend to the owners of the business, this is a tool for other lenders to use in order to reduce risk and easier to access capital. </p></li>
<li><p>While First Financial Capital does not do any SBA loans, we understand the lengthy process to obtain SBA financing and work with our borrowers to make sure they can efficiently refinance without any penalties.   </p></li>
</ul>


SBA Loan – Small Business Administration Loan

<h1>OLB - Outstanding Loan Balance</h1>

<h1>SFR - Single Family Residence or Single Family Rental</h1>

<h1>QSR - Quick Service Restaurant</h1>

<ul>
<li>often times used to describe fast food tennants</li>
</ul>

<h1>C-store - Convienence store</h1>


Acronyms

<h1>Description</h1>

<ul>
<li>An interest only loan is a loan repayment method where the borrower is only liable for paying the interest charges for a designated term period. There are both benefits and drawbacks from choosing an interest only repayment method instead of choosing an amortizing loan. </li>
<li>The main benefit to having an interest only loan is the lower monthly payments, however this comes at the cost of having either a higher installment towards the end of the loan term or even a large balloon payment to pay off the <a href="https://www.firstfincap.com/articles/acronyms">OLB (outstanding loan balance)</a>.</li>
<li>While First Financial Capital specializes in customizing loan to meet personal needs, the majority of the loan given by First Financial Capital are interest only loans. </li>
</ul>


Interest Only Loan  (IO)

<h1>Description</h1>

<ul>
<li>The amortizing loan is the most common loan repayment method in the banking realm, where the borrower payments are allocated to both interest and the principal balance of the loan. This loan repayment method can be structured in many different ways until a loan matures. The simplest schedule is where the debt service remains the same throughout the entirety of the loan where as each payment that is made, more of the principal balance is paid off and less is allocated to interest. </li>
</ul>


Amortized Loan

<h1>Definition</h1>

<ul>
<li><p>The loan to cost ratio is used in construction projects to describe the loan amount in relation to the cost of building a project. While the LTV is determined by using the fair market value of an asset, it is unclear and hard to determine what the project value of a project will be before it is completed or before it generates revenue. This ratio is determined by dividing the loan amount by the cost of construction. </p></li>
<li><p>First Financial Capital has a clear understanding of the projected value of a project which allows for us to provide high ltc for building gas stations, truck stops, hospitality assets, and luxury homes. </p></li>
</ul>


Loan to Cost (LTC)

<h1>Definition</h1>

<ul>
<li>The loan to value ratio, also known as the LTV is the measure of risk that a bank is willing to place on a collateral asset. Every financial institution has different lending criteria’s, some of which need to follow strict guidelines in order to meet regulatory standards. The value of the property is typically determined by a professional appraiser. </li>
</ul>

<h1>Examples</h1>

<ul>
<li>Some of the regulatory standards involve requiring low LTV for <a href="https://www.firstfincap.com/articles/special-purpose-property">special purpose properties</a> such as gas stations, hotels, motels, etc. As a result, First Financial Capital found their niche in special purpose properties, in order to provide an opportunity to active investors who are not capitalized.<br></li>
</ul>


Loan to Value (LTV)

<h1>Definition</h1>

<ul>
<li>A special purpose property is a property which essentially tied to the business that is occupying it. Financial institutions are skeptical to financing these properties considering if the business fails, the property in turn becomes useless dirt.<br></li>
</ul>

<h1>Examples</h1>

<ul>
<li>Properties with service stations are considered special purpose due to the fixtures that are associated with it (i.e., underground storage tanks) and the potential of having a contaminated property. This reduces the likelihood of converting the property into a different use because lengthy process and the costs associated with it. </li>
</ul>


Special Purpose Property 

<h1>Definition</h1>

<ul>
<li><p>A ROFR is known as right of first refusal. Typically found in lease agreements, loan agreements, franchise agreements, etc. This is only beneficial to the party who has the ROFR since this is an option that can be exercised if desired. </p></li>
<li><p>Under the general ROFR, they can then be customized in many different ways such as specifying when the option can be exercised, and under what conditions it can be exercised. </p></li>
</ul>

<h1>Example</h1>

<ul>
<li>While ROFR are commonly found in real estate agreements, it is important to note that in some cases a ROFR can be prejudice to certain parties. For example, it can state that the party that has the ROFR has the option to exercise at “market-value” which could be lower than the outstanding loan amount on the property. </li>
</ul>


Right of First Refusal (ROFR)

<h1>Definition</h1>

<ul>
<li>The term market value is an opinion used to determine the value or price an asset would sell for based on demand metrics. When determining the price of asset, there are different methods that buyer and seller can use to determine the price without listing an asset for sale. In order to get a general idea one can either look up recent comps or they can get a professional appraisal</li>
</ul>


Market Value

<h1><strong>Definition</strong></h1>

<ul>
<li>A letter of intent also known as an LOI is a preliminary document which is used to detail agreement terms to a transaction. An LOI is typically the first formal document to initiate a prospective business transaction. Often times an LOI is non-binding, however always be cautious before signing or sending out any LOI because the fine print can specify otherwise. </li>
</ul>

<h1><strong>What a borrower can expect to find in an LOI presented by a private lender</strong></h1>

<ul>
<li>Total loan amount including cost breakdown </li>
<li>Collateral requirements</li>
<li>Interest Rate and amortization schedule</li>
<li>Pre-payment penalties</li>
<li>Renewal options</li>
<li>Purpose of the loan</li>
</ul>

<h1>*<em>Example - Acquisition *</em></h1>

<ul>
<li>In the event that a prospective real estate purchaser does not have the necessary funds to purchase a property and wants to submit a competitive offer, the buyer can have an LOI in hand issued by a lender allowing them to submit an all-cash offer. </li>
</ul>


Notes from First Financial Capital