Chatted with Robyn King a few days ago about ground leases relating to financing issues and how some SBA lenders look at this issue. This is what she had to say about this issue:
"One area of expertise I have is doing franchise lending utilizing ground leases. There are no more moving parts than in a transaction like this. For those that are not aware of ground leasing, it is a type of transaction that occurs when a land owner wants to retain ownership of the land and lease the property to a business owner. The business owner will be constructing a building on the property for a specified period of time. It may be thirty to forty years or longer. Many lenders will not like to participate in a transaction like this, because the collateral is poor. It is essentially a constructed building with no land.
Most borrowers would prefer to own the land but have to get involved in this type of transaction when land prices have soared or land is scarce. When you find yourself in this situation, you need to negotiate well. If it is a franchise transaction, you will have a franchisor to deal with, a land owner, a banker, an equipment vendor, a title company, an appraiser, several attorneys and a host of back office personnel so you need to understand each player's plight and how to handle them.
After you find an experienced lender who understands what you are doing, you will need to put both parties (the lender's legal counsel and the landlord's legal counsel together before you proceed with the construction and the funding. Many borrowers do this at the end of the game only to find out that there are insurmountable problems that will cause the deal to faulter. Always get in writing what each party is willing to do, so you won't be left empty handed at the end of the deal. You will need to know what a leasehold estate is and how it effect the land owner's property. Remember anything can be accomplished but you need to know how to approach the situation."
|Helpful Resources To Assist In Selling And Buying California Businesses|
|Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area
Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.
|Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services
Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 805-428-2063.
|Joe Sandbank, Esq. - Legal Services
I have provided legal counsel to business buyers, sellers and brokers for over 17 years. With prior experience as a business broker and SBA loan officer, Joe brings both a practical and legal approach to all aspects of the business acquisition process.
|Elizabeth McGovern: Escrow Services - SF Bay Area
McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.
|Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses
Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.
|Diane Boudreau-Tschetter: Escrow And Bulk Sale Services
California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.
|Helen Yoo: Escrow & Bulk Sale Services - Southern California
New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.
|Ranvir S. Sandhu, Esq. - Legal Services For Buyers And Sellers
I've worked at top Bay Area law firms and have extensive experience with business entity formation, mergers, dissolutions, conversions, employment matters, including experience in reviewing and negotiating transactional documents such as leases and purchase agreements.
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