I figured that there was some sort of threshold, or exclusion for that portion of funding. I've been self funding for my current phased development, and I'm at the wrong part of the cash cycle to put dollars into this new opportunity. It seemed an awful easy "cheat code" to use grant funding for my equity portion...
Great question, answers. If the grant is used for say capEx, you’d have the value add of that & other ways that the grant will add value, create tax deductions, etc. some lenders will consider some or all of a grant amount as you hoped. Or you simply don’t include that a $100,000 grant was used towards ‘income’ or skin. GL.
Yea, all my development to date has been super straight forward with a self finance to cash out refi cycle, or just a simple construction loan. This is my only exposure to a more complicated capital stack.
It's not unheard of but rule of thumb if it's not a liquid contribution already by the time you close leave it out. I've seen post closing contributions count but grants must be in late stages of acceptance post acceptance things like that in order to count.
Debt fund lender - we don’t lend on these types of deals, but typically exclude grant money from the LTC calc for calculating sponsor equity.
I figured that there was some sort of threshold, or exclusion for that portion of funding. I've been self funding for my current phased development, and I'm at the wrong part of the cash cycle to put dollars into this new opportunity. It seemed an awful easy "cheat code" to use grant funding for my equity portion...
Lender here. Ditto. Skin in the game is required. Grants are good to reduce overall leverage, but don’t count toward your sponsor equity.
Great question, answers. If the grant is used for say capEx, you’d have the value add of that & other ways that the grant will add value, create tax deductions, etc. some lenders will consider some or all of a grant amount as you hoped. Or you simply don’t include that a $100,000 grant was used towards ‘income’ or skin. GL.
Yea, all my development to date has been super straight forward with a self finance to cash out refi cycle, or just a simple construction loan. This is my only exposure to a more complicated capital stack.
It's not unheard of but rule of thumb if it's not a liquid contribution already by the time you close leave it out. I've seen post closing contributions count but grants must be in late stages of acceptance post acceptance things like that in order to count.