Hi! Thanks again for another question.
Here are the definitions and examples of the terms interim and
permanent financing.
Interim Financing - "A construction loan made during completion of a
building or a project. A permanent loan usually replaces this loan
after completion."
"Interim Financing"
http://www.newloanguide.com/glossary-terms/Interim-Financing/
Example of Interim Financing:
"If you are buying a new house before your old home has sold, and you
don't have adequate savings for the down payment, you may need to
obtain interim financing. You can do this with a bridge loan (also
called a swing loan)."
"Bridge loans are short-term loans that allow you to borrow against
the equity in your current property at interest rates much higher than
conventional loans. In most cases, you can expect to borrow 75 percent
to 90 percent of the value of your current home, for a loan term of up
to 180 days."
"Bridging the Interim Financing Gap"
http://houseandhome.msn.com/selling/guides/bridgingthegap.aspx
--------------
Permanent Financing - "Long-term debt or equity financing. In general,
permanent financing is used to purchase or develop long-term fixed
assets like factories and machinery. Since the payoff from a long-term
asset tends to be over a period of time, financing through long-term
options reduce the risk of principal payoff not being made (in the
case of debt financing)."
"permanent financing Definition"
http://www.investorwords.com/cgi-bin/getword.cgi?3673
Example of Permanent Financing:
"A new build will first be financed with a construction loan.
Permanent financing comes after the home is completed. Most lenders
will, however, offer a construction-to-permanent financing package.
You only have one loan closing, and you should be able to lock in a
rate for the permanent financing when you close on the construction
loan."
"Pre-qualifying for my new home"
http://www.bankrate.com/brm/news/DrDon/20030113a.asp?prodtype=mtg
Search terms used:
"interim financing" glossary
"permanent financing" glossary basics
I hope these links would help you in your research once more. Before
rating this
answer, please ask for a clarification if you have a question or if
you would need further information.
Thanks for visiting us again.
Regards,
Easterangel-ga
Google Answers Researcher |
Request for Answer Clarification by
shoaib-ga
on
23 Apr 2003 18:56 PDT
Hello Easterangel-ga and thanks for your beautiful answer but please
a little more clarification of your answer. You said that 'in
general permamant financing is used to purchase or develop
long-term fixed assets like machinery', I want to mention that
please go to the glossary webpage of
www.1stcapitalsolutions.com/gloss.htm website and here you will
see the following slightly different definition of permanant
financing;
Permanent Financing
A mortgage loan, usually covering development costs, interim loans,
construction loans, financing expenses and marketing, administration,
legal and other costs. This loan differs from the construction loan in
that financing goes into place after the project is constructed and
open for occupancy. It is a long-term obligation, generally for a
period of 10 years or more.
Please provide 'clarification' of the above mentioned slightly
different definition of permanant financing. Thanks for your
help from shoaib.
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Clarification of Answer by
easterangel-ga
on
23 Apr 2003 21:56 PDT
Shoaib-ga thanks for asking a clarification and for the additional
information.
I have to admit that the initial definition I provided for permanent
financing was rather inadequate in comparison to the one you gave. In
this regard, I apologize. :)
However if you look closely at the example I gave for "Permanent
Financing", which was the last link, I was able to cover the concept
you mentioned as well.
"Permanent financing comes after the home is completed. Most lenders
will, however, offer a construction-to-permanent financing package.
You only have one loan closing, and you should be able to lock in a
rate for the permanent financing when you close on the construction
loan."
"Pre-qualifying for my new home"
http://www.bankrate.com/brm/news/DrDon/20030113a.asp?prodtype=mtg
It is indeed quite confusing to take note of this and for that it was
my mistake. Your defintion covered all the bases
Thanks again!
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Request for Answer Clarification by
shoaib-ga
on
25 Apr 2003 22:18 PDT
Hello Easterangel-ga and thanks for your answer and I shall now
give a five star rating to your answer but before that I need a last
clarification of permanant financing loan. As indicated above that
permanant financing is used to cover the expenses of the
property or loan and permanant financing comes after the
property is constructed and ready for occupancy, I want to know
that what would be 'security' for the permanant financing or
loan so as to repay it back to the financial institution?
Thanks for your help.
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Clarification of Answer by
easterangel-ga
on
25 Apr 2003 23:50 PDT
Hi shoaib! You said:
"I want to know that what would be 'security' for the
permanant financing or loan so as to repay it back to the
financial institution?"
One way to answer this is to find a sample permanet financing product.
The Reinvest Fund company offers different types o financing including
permanent financing. It requires the following as collateral:
Lien on business assets
Personal guarantees required
Depending on loan request, personal collateral may be required
"Small Business Financing"
http://www.trfund.com/lending/smallbusinesses.html
of course collateral requirements would vary upon different lending
companies.
Thanks again!
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Request for Answer Clarification by
shoaib-ga
on
30 Apr 2003 02:57 PDT
Easterangel you had said that security for permanant financing is the
'lien on business assets' and please note that lien means right
to hold another's property till debt on it is paid so it means
that if a borrower applies for mortgage loan and permanant financing
for purchase of residential property for investment then in this case
that residential property would be pledged as collateral for
repayment of permanant financing till that permanant financing
for that property is paid. Please provide clarification of my
statement. Thanks.
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Clarification of Answer by
easterangel-ga
on
30 Apr 2003 03:19 PDT
Yes shoaib that is my understanding as well.
But since it says "lien on business assets", the lien may also apply
to other business properties like a pre-existing factory, aside from
the one being constructed which is the subject of the permanent
financing.
So in this case if Company X has factory A and wants to construct
factory B. So Company X gets permanent financing for factory B but the
lien maybe against factory A.
I hope this makes it clear.
Thanks!
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