GlobeSt.com: Is there a difference in cost for the borrower between a recourse and non-recourse loan?

Shah: The non-recourse route has a higher cost associated with it because it is a type of bond financing and there is a securitization process that is necessary with that type of loan. In addition, pre-payment conditions are stricter because the loan gets converted to a bond and the bond investors need to be made whole when their bonds are paid before maturity. The pre-payment penalties may not be as high if the loan is paid off in a higher interest rate environment. On the positive side, these policies allow owners to avoid the risk of providing personal guarantees, reducing the amount of liabilities on their personal financial statements, and result in lower rates and better terms including higher leverage point than that of a recourse loan. Because CMBS loans are usually assumable by a new property owner, any penalties can potentially be avoided in the event the hotel is sold before the loan matures.

GlobeSt.com: Does it matter who you go through to get a non-recourse loan?

Shah: Absolutely, you need representation to go through the due diligence process, otherwise, you could stand to lose a sizable deposit. This is a case where your relationships matter. Your valued lending expert will use the power of his or her connections to intervene on your behalf to get a compromise and close the deal in case there is a problem during the loan process. In addition, some flexibility on pre-payment options and other key terms can be built-in while negotiating the original deal with an experienced professional on your side.

GlobeSt.com: What can a borrower do to ensure the financing they receive at the end is what they were promised or expected?

Shah: Do your homework prior to engaging a financing intermediary or mortgage loan broker, learn about his or her track record, technical and practical expertise and depth of industry relationships. When your advocate has a gold star on all three of those, you get the best representation.

When track record meets expertise and relationships through the efficiency of technology, the outcome is Aries Capital's LendingCap. This automated mortgage banking platform specializing in non-recourse, permanent and bridge loans from $3 million to $75 million for hotel, multifamily, self-storage, retail and other commercial properties nationwide results in a more streamlined approach, using online automation to track documents through the process and reduce the loan processing time.

LendingCap's originators work closely with an extensive network of vetted senior decision-makers at top Wall Street CMBS lenders and other institutional investors to offer competitive rates and terms. LendingCap ensures the strictest service standards are met from beginning to end. A simple online dashboard allows borrowers, their employees, accountants, originators and underwriters, real-time access to every step in the loan process, resulting in faster closings, which saves time and money. This time and cost savings is shared with the borrower as credits at closing.

Basically, the new service allows the ability to pre-underwrite the loan and obtain the highest loan amount, changing how non-recourse commercial loans are originated. This takes the worry and uncertainty out of what was once a cumbersome process.

GlobeSt.com: Do you have any tips for choosing a CMBS lender?

Shah: It can be a maze for the borrower. First, many Wall Street CMBS lenders don't encourage borrowers to apply directly, instead recommend they use an intermediary who has experience successfully closing CMBS loans. Borrowers who do go direct, may end up with less attractive terms or miss out on more viable financing options. For example, often only 20% of an individual CMBS lender's overall mortgage pool can be allocated to hotels. This quota is met very quickly, making timing and access crucial. Just as you would call on an experienced lawyer to negotiate a contract or represent you on a legal matter, partnering with an experienced financier who knows what each capital source has to offer and understands each lender's unique goals and constraints, can make your financing process more efficient and rewarding.

Wall Street capital is more plentiful now for the hotel market than ever before. This type of non-bank, non-traditional capital is more flexible and nimble because of the availability of bridge lenders, debt funds and other temporarily balance sheet loan solutions. Starting your CMBS financing search is simple. As an example, our process starts with a phone call with the hotel owner to fully understand his or her financing needs. To analyze and underwrite the deal, we then ask the borrower to sign on to LendingCap.com, answer a few basic questions, provide a current STR report and the property's trailing 12 months operating statements, if available. If the deal requires repositioning or reflagging, or if it is newly constructed, we ask for three years of projections. Leveraging our 24 years of experience in the hotel space as a capital intermediary, hotel owner and direct lender, along with our market knowledge and relationships, we will deliver a preliminary term sheet that outlines the best available financing a few days after the initial call or deal submission on our online platform – LendingCap.com. We remain in control of the process and are only paid a success fee when the loan is closed.