Case Study: Saving a Contract Nearly Derailed by COVID-19

businessman in crisis and stress at computer laptop holding monitor watching online his funding fall through

COVID-19 has affected us all. Though you may not know it, it has had an effect on the way we do business here at Actium Partners. Despite COVID-19 interruptions, we have continued to forge ahead approving and funding loans on behalf of our clients. One case in particular was almost derailed by the COVID-19 pandemic.

The Problem:

Actium Partners got a call on a recent Friday afternoon from a real estate investor working on a property he had under contract. The property was scheduled to close just three days later. Unfortunately, the investor’s banker got cold feet due to the COVID-19 pandemic. Our client now had an extremely short window of time to secure funding in order to close on Monday.

Expecting a bank to provide funding on such short notice would be a fool’s errand. Bankers do not work weekends, and this was Friday afternoon. The client contacted us in hopes of securing a bridge loan that could allow him to stick to Monday’s closing. He would then seek out more traditional financing to repay his loan.

The Solution:

We took the client’s application over the phone. He described what he was attempting to acquire, how much he was planning to spend, the estimated value of the property, and so forth. Based on that application we arranged to send a representative to the property that same day.

Our representative did a complete and thorough inspection. We were satisfied with the results of the inspection and approved the loan. On Monday, we drew up the documents and wired funds directly to the title company. Closing went forward on schedule and the property was successfully acquired.

The Outcome:

This particular case study offers a perfect illustration of why hard money and bridge loans are more attractive when you have immediate funding needs. Our client wound up with the necessary funding to close a particularly important real estate transaction. Because our funding was structured as a bridge loan, the lending contract gave our client an opportunity to seek out additional financing at a later date.

Our client was extremely pleased with the speed at which we processed and funded the loan. He was also pleased that we would not impose a prepayment penalty. He can wait until the loan’s maturity date to repay, or he can repay early without any additional penalties.

In Summary

This particular loan is one that we are extremely proud of. As you know, the COVID-19 pandemic has impacted nearly every aspect of daily life and business. The effects of the pandemic and its resulting economic downturn are leaving a lot of people nervous. It is certainly making banks nervous. We are not surprised to hear stories of banks backing out of previously approved loans out of fear of another recession.

Here at Actium Partners, we do things differently. We do not face the same types of constraints that banks face. Thus, we are able to move more quickly when immediate needs arise. We are also able to look at each loan on a case-by-case basis, giving us a lot more flexibility. We could do for this particular client what a bank could not.

We are pleased to know that our client walked away both funded and happy with the loan we made. We are pleased to know that we could help him close on a real estate transaction that was hanging in the balance. Within just a few hours we were able to approve his application and fund a contract-saving bridge loan. Both of us came out winners in the end.