The “Stand by Takeout” Loan
Intended to be drawn down and then repaid according to normal promissory note terms.
Stand by Takeout is different from a line of credit because the standby takeout does not contemplate a revolving relationship in which the borrower obtains money, repays some or all of it, and then has that same amount of credit available again for new borrowings.
- $1 to $50 million
- Up to 10 days LOI with proper documentation
- As Fast as 30 Days for Closing with proper documentation
- Up to 75% Loan-to-Completed-Value Ratio
- Term up to 3 years and up to 25 years amortization if funded
- A lender’s promise to make funds available to a borrower for a specified period of time.
The most typical use is when a developer needs a takeout loan—permanent financing that will “take out” the construction loan
In order to obtain a construction loan. Rather than lock in possibly high interest rates and prepayment penalties for permanent financing,the developer will pay a fee for a standby commitment.
When the project is completed,the developer can then elect to fund under the standby and then wait and see if interest rates drop or if it will sell the project rather than retain it, or proceed with permanent financing.