A Loan We Declined: Not Enough Skin in the Game

We were approached to make a loan to purchase a multi-family property spread over multiple buildings in the Millcreek area of Salt Lake County, Utah. The borrower planned to convert the property into condominiums, and it was in a desirable neighborhood with strong demographic trends. Because of the great location we decided to perform additional due diligence.

The borrower represented that the LTV would be 69%, which is normally within our lending parameters. However, as we probed further, we found that this was based on the assumption of the estimated sales price. The borrower was asking for a loan of 89% for the costs of the complete project. For us, this did not show that the borrower had enough of their own “skin in the game” so we decided to pass.