Golf Course Lenders are Back with Better Terms and Rates!

OOPS! Not in 2010. Golf courses are bad news in the banking world in 2010. I've been talking to golf courses and/or banks in Florida, Oklahoma, Georgia, North Carolina... you name it.

Note: Year 2010 is all different: I'm seeing contracts from mortgage brokers and 'finders' indicating they have 'Banks and Lenders' willing to finance your golf course. They also ask for upfront fees. Before you do anything, hire me to review the offer and your particular business and financial situation. I work at this every day and I know the formulas. I mean, I have a very good idea whether you can finance your golf course on the terms certain brokers and finders are suggesting. I will review your financial information, inventory lists, uncontrolled expenses, and equipment lists and provide my opinion on whether or how your golf course might be financed. My fee for this is only $500 dollars. I assure you it will be money well spent. Mike Kahn

However, the application process has not changed, so it's best to review below...

Ready to get started? Click here: Start financing a Golf Course.

Contact me - Michael A (Mike) Kahn:

Or call: 941-739-3990

[Be sure to review, "Financing a Golf Course"

I've learned from my own experience that golf course financing in 2005 (not in 2010 - let me help you: 941-739-3990) is a little more optimistic than just a year ago. There are two major points you need to keep in mind before you begin the golf course finance process:

1. Lenders look at golf course loans as Business Loans Not Asset Loans, which means the lender's concern is based primarily on the ability of the 'business' to repay the loan.

2. Non-recourse loans for golf courses may be available in 2006-7under certain circumstances. The lender no longer wants your 'first-borne' as collateral to support golf course loans. Still, If you're not willing to place your personal equity into the deal, your golf course loan is less likely.

Of course, the lender still wants all the normal stuff like appraisals, surveys, environmental reports, financials, inventories, etc., but they'll read through the business plan very carefully. They know (and expect) that the borrower tends to 'pad' the business plan with optimistic earnings forecasts. It almost pays to be at least a little optimistic, because the banks do want to put their money to work.


Update, November 2006: Many golf course lenders have cleaned up their default messes of 01, 02, 03, and 04. They are back in the game with fresh money and some golf course lenders have relaxed their terms. If cash flow, experience, and a strong golf neighborhood can be demonstrated, lenders may lend on a non-recourse basis. In fact, we have a term sheet in our hands right now from a major golf course lender offering 30-year AM, 7-year balloon, up to 90% LTV based on a trailing-12 workout!

The best golf course loans I've witnessed recently were in the 70% LTV range and required only the borrower's 'partial' personal guarantee. Loan to value, comfortable debt service ratios, skill of management, and the strength of the borrower's personal guarantee will ultimately dictate what can be borrowed on a particular golf course.

Normally: Expect these parameters:

  1. Loan to value: 50% to 75% - maybe even higher today!
  2. Debt Service ratio expectations: 1.35 and up - likely depending on strength of the borrower's guarantee
  3. Skill of Management: Buyer needs to show golf course operational experience
  4. Strength of Borrower: Borrower's financial statement


There are hundreds of golf courses for sale out there that will not qualify for any amount of financing from institutional lenders - even with serious equity backing up the loan. Meanwhile, there are hundreds of buyers out there with a $1/2 million in cash and lots of energy to apply to golf course ownership. Hence, a possible solution for some buyers and sellers.

There are many golf course sellers willing to help with financing. In many cases, a seller financing might be highly dependent on a 'relationship' between the borrower and the lender. A seller willing to hold paper on a golf course wants to know the borrower well enough to entrust his property to him or her. It's a worth while approach for a young, hard working golf course buyer who lacks the 30% to 50% cash down conventional lenders usually want.

[Update: At Prime Sites USA, our golf course sales division has recently facilitated close to $25 million in golf courses transactions involving seller financing. We have helped our buyers obtain excellent terms from sellers to put them into golf course ownership quickly andeasily.]


At from ½ to 2 points, depending on the size of a loan, or the 'energy' required to achieve a golf course loan, the broker's fees can often be offset by higher LTV's and lower rates. An experienced broker has the knowledge and connections in the lending world to move applications along. An inexperienced borrower going directly to a lender for a golf course loan is far more likely to be turned down than going through a broker. Remember too, that a broker often has several lending sources to work with, and usually knows the ones most likely to approve a golf course loan. I believe a mortgage broker with golf course lending experience is the best way to go.

[Update: We recently obtained a $5.7 million golf course loan package for a buyer that had been turned down by the very same lender. The golf course mortgage broker we worked with was able to re-introduce the loan package, which included Mike Kahn (me) as a member and advisor to the buyer's board of directors. The borrower not only got the loan, but qualified for an additional $500,000, earned better rates and terms, and an extended balloon.]


Let's remember that the loan officer's business is to lend money. Brokers make their money for causing a loan. Therefore, both will look at and encourage almost any loan application - based on the 'as-many-balls-as-possible-in-the-air' theory. The process begins with first contact, usually an informal letter to the lender outlining the project and its financial needs. The lender will respond with a letter-of-interest, which will have a term sheet attached. This stage is always somewhat encouraging, but getting to commitment is the tough part (remember, we're talking golf course loans).

Keep in mind that a golf course lender's main concern is the ability of the business to repay the loan, which is heavily weighted on the management component. Therefore, the business plan needs an executive summary illustrating the skill and experience of the 'people' to provide that reassurance. You'll be far ahead if you have people involved with golf course operational experience on your management team (not necessarily shareholders).

As the loan officer really wants to do the loan, the pro forma statements in the business can be optimistic. It's a balancing act to be both optimistic and realistic, because experienced golf course lenders can see through 'dreamer' forecasts. Remember to include at least seven percent - five percent as a management contingency and two percent for reserves - in your below-the-line cash flow forecasts.
The reason I warn against lenders stringing you along is that we know they all have to get the money working out there. The more applications they see, the more chances they have of putting out good loans. As it progresses you might notice little signs your loan is about to be rejected (not always). One suspicious sign is failure of the lender to meet an implied response deadline - "I'll have an answer on Tuesday." If the deadline passes without his reply, you might start worrying. Other signs might be questions about insignificant items in the business plan, asking the same question over and over, or not returning your phone calls. Another negative sign might be the loan officer's reference to 'questions' from his/her board of directors. As your loan application is costing you time and money, you need to decide when it's time to stop the bleeding and move on.

I've seen loan officers shrug off loans, "So what?" They'll put borrowers through the hoops for weeks, or even months, and then you can't get him/her on the phone. Some loan officers may not tell you the application is lifeless until long after they knew it was dead. That's why if you get the feeling the loan officer doesn't seem to want to talk to you, your application is likely dead. Don't forget the tie up of you, the golf course, and the seller during the loan application period. That's why I suggest some lenders uncaringly 'string-out' borrowers.

[Update: I always recommend having your paperwork ready when you apply for the financing. Lenders tend to change lending policy from time to time, often even without the knowledge of the loan officer you are working with at the beginning of the process. We saw exactly that very recently. The borrower was slow with his loan 'paperwork' - taking several weeks to complete the application package. By the time the loan request went to 'committee' the bank had pulled out of these types of loans and the borrower was left with nothing!]

DISCLAIMER: Michael Kahn is not an attorney, accountant, or a mortgage broker. Information from Michael Kahn comes from personal experience and observations during a fifty-year background in golf. Therefore, with respect to information herein, neither Michael A Kahn, nor Golfmak, Inc. makes any warranty, express or implied for a particular purpose, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information herein and accepts absolutely no responsibility for any person's results.