There are a lot of levers you can pull to mitigate risk, including changing terms to offset the risk of a loan. Risk tolerance is less about a number and more about how you feel sleeping at night knowing the loan is out there. But remember, when you change loan parameters, you will need to consider how doing so might affect other areas of the project. Pulling one lever impacts other places.
Here are six levers you can push or pull to mitigate the risk of a loan, depending on the loan situation and your risk tolerance with the loan.
Loan to value
Narrowing criteria for property
Capital reserves
Personal Guarantees
Length of loan changes
Lowering property valuations
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By Alex Breshears
Private Lender, The Official Magazine of AAPL
Spring 2022 (Q2), p.28-31
Published on April 22, 2022