Owner-Occupied Commercial Real Estate Financing Solutions For Asset-Based Borrowers
Every business owner understands leveraging an asset. A line of credit secured by accounts receivable is a routine financing conversation. So is a facility secured by heavy machinery that stays on the floor running production every day. The asset keeps working. Its value backs the capital the business needs.
A building is no different.
If your company owns the facility it operates out of, the equity in that building is likely the largest asset on your balance sheet, and in most cases it is doing nothing at all. It sits there while the business funds growth out of operating cash flow, or doesn't fund it.
LVRG Business Funding structures owner-occupied commercial real estate financing solutions for asset-based borrowers across Michigan: established manufacturers and lower middle-market companies doing $1 million to $25 million in annual revenue, financed on the strength of what they own rather than what a credit box says about them this quarter.
What an Asset-Based Borrower Is
An asset-based borrower is a company underwritten primarily on collateral rather than on operating cash flow. The business owns real, valuable things: a facility, equipment, receivables, inventory. Those assets carry the financing.
Most established manufacturers are asset-based borrowers whether or not anyone has ever used the term with them. They own their building. They own machinery worth millions. They carry receivables running 60 to 90 days. That profile is exactly what this structure is built around, and it is why it works when a conventional loan doesn't.
Why Owner-Occupied Commercial Real Estate Financing Works Differently
The mechanism explains everything else on this page.
In conventional bank financing, operating cash flow carries the debt. The bank measures whether current earnings service the payment, and when the coverage ratios fall short, the answer is no. That test has almost nothing to do with what the company owns.
In owner-occupied commercial real estate financing structured for an asset-based borrower, the building carries the weight. Because the collateral is doing the work, these facilities can be structured on terms that put far less pressure on monthly cash flow than the higher-cost financing a company typically ends up in after a bank declines. That distinction is the whole point. A company that needs capital is usually a company that cannot afford to choke its operations to get it.
What Companies Use It For
The two that bring most companies to us:
Retiring high-interest debt that consumes cash flow faster than the business can earn it back, including consolidating several obligations into one structure
Funding growth, whether that means an expansion, a facility move, added capacity, or finally capturing a backlog the company has been turning away
Also common:
Working capital that moves with the business, covering materials, payroll, and inventory while receivables run 60 to 90 days out
Equipment purchases
Paying off an existing lender
What to Do When a Bank Says Your Numbers Don't Qualify
Banks treat bankability as a yes or a no. The numbers clear the credit box or they don't, and when they don't, the conversation is over.
That is almost always a timing problem rather than a permanent condition, and it is one of several reasons a bank often isn't where this financing gets done. A company carrying an expensive loan shows weak coverage ratios because of that loan. Clear it, restore the cash flow, and the same business looks entirely different two quarters later.
We structure these facilities with that ending in mind. The financing solves what is in front of the company now, and it is built from the first conversation to be refinanced into conventional bank financing once the numbers support it. There is a defined next step, not an expensive loan left to sit.
A Recent Closing: Second-Generation Packaging Manufacturer, Wayne County
A stable, profitable packaging manufacturer, second generation, decades in business, came to us carrying roughly $1 million in debt across four obligations: a $250,000 mortgage on its building, a bank line of credit, an equipment loan, and a short-term term loan at 49% interest with a $500,000 balance.
That last one was the problem. The payment was $26,000 a month. On an otherwise healthy company, that single obligation pulled more than $300,000 a year out of the business before anything else got paid.
The company spent roughly six months being passed between banks. None would take on the payoff. Receivables alone weren't enough to cover it, and the debt service coverage ratios, dragged down by the very loan that needed clearing, didn't fit a conventional credit box.
What none of those banks acted on: the company owned its 35,000 square foot facility outright apart from the $250,000 mortgage, leaving roughly $3 million in equity sitting idle. On paper the company didn't qualify. On assets, it was strong.
We structured a $1.5 million term loan secured by the building. One million of it retired every existing obligation: the mortgage, the line of credit, the equipment loan, and the 49% term loan. The remaining $500,000 went to the company as a cash injection. Behind it, we placed a $500,000 working capital line of credit secured by accounts receivable.
The result: $1 million in debt gone, $26,000 a month in cash flow restored on that one obligation alone, and $1 million in capital available to fund growth. The company is on track to refinance into conventional bank financing in the months ahead, which was the plan from the first conversation.
Related Financing
Frequently Asked Questions
What is owner-occupied commercial real estate financing for asset-based borrowers? It is financing secured by the equity in a building a company owns and operates from, underwritten on the strength of that collateral rather than on operating cash flow alone. LVRG Business Funding structures these facilities for established Michigan manufacturers and lower middle-market companies, typically to retire existing debt, fund growth, or provide working capital.
Can I leverage the equity in a building my business owns? Yes. Where a company owns the facility it operates from and holds meaningful equity in it, that equity can serve as collateral for a term loan, in transactions from $500,000 to $15 million.
What is an asset-based borrower? An asset-based borrower is a company underwritten primarily on what it owns, real estate, equipment, receivables, and inventory, rather than on operating cash flow. Most established manufacturers fit this profile.
What if my business doesn't qualify for a conventional bank loan right now? Falling short of a bank's debt service coverage requirements today does not mean a company cannot be financed. Where there is meaningful equity in an owned building, LVRG structures financing against that asset and builds a path to refinance into conventional bank financing once the company's numbers support it.
How can a company get capital without straining monthly cash flow? Financing secured by commercial real estate equity places the weight on the asset rather than on operating earnings, which generally means the business can access substantial capital with less impact on monthly cash flow than financing the same amount against earnings alone.
How can a company pay off high-interest business debt? For a company that owns its facility, one of the most effective methods is a term loan secured by the building's equity, used to retire higher-cost obligations. The monthly savings often transform cash flow immediately.
How much equity do I need in my building? It depends on the transaction, though these structures generally require substantial equity relative to the financing requested. LVRG structures transactions from $500,000 to $15 million.
What kinds of companies use this structure? Established Michigan manufacturers and lower middle-market companies doing $1 million to $25 million in annual revenue, including tool and die shops, injection molders, metal stampers, machine shops, metal fabricators, plastics and packaging manufacturers, along with construction, concrete, and excavation companies.