Commercial Loan Financing – Funding Business Growth

Actually, traditional financing may not be the only way of getting money or borrowing money that your need in order to move forward with your projects or business. You can look for commercial financing loan from a lender who specializes in funding your projects.

Commercial financing loan are designed only for business purposes and they understand the business that you do where in they regularly work with business like yours.

The commercial financing loan is available for wide variety of projects and can be approved far more quickly than traditional bank loans. So in finding a commercial financing loan, be sure that you are working with a great lender that is willing and able to work with you to smooth out the process of growing your business knowing that there are other business professionals which are not sure where to look for in order to find the right commercial financing loan that they need.

To be sure, try to ask from your friends or relatives if they know of a reputable commercial loan financing where you can be at ease and help you with your problem in financing loan for your business. Take note that commercial loan financing is also known as commercial mortgage financing.

Before anything else or looking for the commercial loan financing, you need to organize, plan and complete the detailed business plan to get commercial financing loan since the lenders want to know extremely the details of your proposed business ventures before they could help you. You need to show them your targets and describe to them in details how you will run or operate your business. Show the lender how many people you need to work with you on your business, monthly expenses, and estimated profit and how you intend your business to generate cash flow.

You need to have a complete economic and cash flow assessment in order to gain the commercial loan financing and show them how your business future will be good in the area where you wish your business to start. If the lender find your business effective through your cash flow assessment that means you know how to manage the money then for sure they can help you with your business.

Don’t go to one commercial loan financing but instead go out and shop for it and compare their interest rates, term and conditions so that you can get the best commercial loan financing that suit best to your needs. What is important in commercial loan financing is that they are trustworthy, reliable lender who knows you, your goals and your needs. You need to have a solid relationship with the lenders so that you feel as t ease and can ask a lower interest rate as possible.

Stated Income Commercial Loan For Your Commercial Property

A sicl is a commercial loan that does not require the full documentation that is required of a full document commercial loan. This type of commercial loan does not require the borrower to be able to prove that they can afford to make the loan payments from their own personal income but instead relies on the rents of the commercial property or the possible rents for the property.

Financial Benefits of a stated income commercial Loan include:

* Less Documentation The stated income commercial loan requires less documentation than a tradional commercial loan. In many cases since the loan is only underwritten to the properties cash flow or potential cash flow it is not necessary to provide as much documention.

* Easier approval process This commercial loan has an easier approval process because it does not have to be underwritten to both the property cash flow and a secondary repayment source such as the borrowers personal income.

secondary repayment source such as the borrowers personal income. Lower credit score requirements Some of these commercial loan programs also have reduced credit requirements.

Examples of a typical stated income commercial loan borrower include:

* A self employed small business owner that does not report all of their income on their tax returns who is looking to purchase a commercial property using a commercial loan.

* A real estate investor that does not show the amount of income necessary to qualify for a traditional commercial bank loan but the property has rental income that will support the debt payments.

Purpose

A stated income commercial loan is designed to help a borrower purchase real estate that they would otherwise be unable to purchase without a significant down payment. The commercial property does not have to be held in the name of the borrower or the operating company but can be held in the name of a holding company.

There are certain criteria for eligibility of this type of commercial loan.

The business that is occupying the property must be in business at least 2 years.

The guarantors credit score must be 600 or above.

The guarantor and operating company can not have a bankruptcy that is more recent than 3 years.

Structure

This commercial loan is only done on a first trust basis although it is possible to have a second trust provided by someone else. There are instances where combined total financing can be close to 100%. This depends on the type of commercial property, credit of the guarantor and other underwriting factors. Closing costs can be financed into the loan under most circumstances.

Easier than you think!

The stated income commercial loan is really meant to help people qualify for a loan without the hassle of providing the full documentation needed on a traditional bank loan.

Rates are slightly higher.

The interest rates are slightly higher for this type of commercial loan but the loans can be amortized up to 30 years.

The stated income commercial loan closes quickly in most cases.

It usually takes about 30 to 45 days from start to finish to close this commercial loan.

Borrowers do not have to use their house as collateral.

It is very rare that a stated income loan will need to use the borrowers home as collateral.

Borrowers with less than perfect credit can qualify.

Borrowers with credit scores as low as 600 can qualify for these programs. If your credit is within 40 points of this number it is possible that you may have some mistakes on your credit that we can help you fix while closing your loan. So even if your credit does not meet the 600 number today, it may when we are done with your loan.

Commercial Loans and Working Capital Lenders to Avoid

Avoiding critical problems is vital for a small business owner seeking help with commercial loans. Successful working capital management especially requires that problem lenders be avoided for business loans and commercial mortgage financing.

One of the most serious commercial loan situations is a small business commercial lender that causes problems for their commercial borrowers on a repeating basis. Commercial borrowers should be prepared to avoid certain problematic commercial lenders unless alternative working capital loan options are impossible.

This article will not name specific lenders to avoid. This article will focus on how important it is to avoid lenders that cause the problems described below. We will provide several examples to demonstrate why commercial borrowers should be prepared to avoid a number of commercial lenders when seeking commercial mortgages and small business financing.

I have been advising business owners for many years, and I have encountered many commercial loan situations which have involved commercial lenders that I would not recommend as a result. This conclusion is typically based on an obvious pattern of lending abuses by select business financing providers.

As a first example of lenders to avoid, I have published an article which discusses the tendency of many banks to say “yes” when they mean “no”. Such banks will typically attach onerous business financing conditions to commercial loans instead of simply declining the loan. Business owners should explore other commercial mortgage alternatives before accepting commercial financing terms that put them at a competitive disadvantage.

The second example of lenders to avoid involves the commercial appraisal process. For commercial mortgage loans, commercial appraisals are an unavoidable part of the commercial loan underwriting process. The process to obtain commercial appraisals is expensive and lengthy. Avoiding commercial lenders which have displayed a pattern of problems and abuses in this area will benefit the commercial borrower by saving them both time and money.

The third example of lenders to avoid is illustrated by those which provide worthless pre-approvals for commercial loans. Many borrowers think it is important to obtain a business loan pre-approval. The apparent result of the preliminary business financing approval is that it will allow the borrower to make other business commitments which are dependent on the commercial mortgage being approved.

Commercial borrowers should expect that a valid approval will not be regularly issued in a day or so. Any form of commercial financing approval will be treated as a binding action by ethical lenders. Nevertheless there are commercial lenders who provide their own special version of a pre-approval within just a few days of receiving preliminary application information. Because this abbreviated approach to pre-approvals almost always produces unexpected surprises for the commercial borrower as the business loan process goes forward, commercial borrowers need to be extremely wary of any commercial lenders that take this approach.

Why would a lender use a questionable commercial loan pre-approval? Here are two primary possibilities. The first reason is to employ a pre-approval process that resembles the approach used for residential mortgage loans. A second reason is to cause borrowers to prematurely end their financing search due to the often false hope created by an artificial approval.

Since many commercial mortgage loans are arranged by residential mortgage brokers who are frequently unfamiliar with common commercial loan procedures, this reason will be especially applicable when dealing with commercial lenders that specialize in dealing with residential mortgage brokers. This type of commercial lender should be avoided at all costs for most business financing situations.

The fourth example of lenders to avoid is related to lack of sufficient lending competition. It is not unusual for the leading small business lender in some markets to use more restrictive commercial loan terms. Such lenders often take advantage of a lack of other local commercial lenders. It is not wise for borrowers to rely upon local and regional banks for most business financing requirements. A non-local lender can frequently provide better business loan terms for most lending scenarios because they are routinely competing with other business lenders.

Commercial Loan Retainer Fees

Retainer fees are “standard business practice” for some (but not all) commercial loan situations. It is understandable that a commercial borrower would rather not pay such a fee, so it is important for a commercial borrower to understand when it is more likely to be necessary. In fact a business loan retainer will not be necessary in many business loan scenarios. This is especially true of commercial financing such as business cash advances that takes less time and produces funding within just a few days.

For more time-consuming commercial loan processes, it is increasingly common for a retainer fee to be paid during the preliminary stages. This is especially true when working with business loan consultants that specialize in commercial loans. Most advisors who work with residential mortgage loans (and perform commercial loans as a sideline to their main business activities) will not charge a retainer fee because in many/most instances they are legally prevented from doing so by certain state and federal regulations (in other words, it is likely that they too would charge a retainer fee if not legally prohibited from doing so because of prevailing residential loan compliance issues).

So why wouldn’t a commercial borrower who doesn’t want to pay a retainer fee simply work with someone who doesn’t charge a retainer fee? Many commercial loan situations are too difficult for the average residential loan advisor to handle successfully. Similar to a person seeking a more expensive medical or legal specialist to help them when confronted by a serious medical or legal problem, most commercial borrowers have come to realize that business loan problems are frequently just as serious and complex and deserving of a commercial loan specialist.

It is in these situations when a commercial borrower is working with a business loan specialist that a retainer fee should be viewed as “standard business practice” for more difficult and time-consuming commercial loans. I have stated elsewhere that one of the most important lessons to be learned from a thorough analysis of commercial financing “trade-offs” is that the lowest rate is almost never associated with the best deal for the commercial borrower. A similar observation based on over 25 years of business loan experience: the lowest fees are also rarely associated with the best deal for the commercial borrower.

The fees charged by commercial loan specialists (including retainer fees when appropriate) are almost always higher than loan advisors who do not specialize in business loans. In the end, most of these borrowers still choose to deal with a highly-qualified commercial loan specialist because they ultimately realize that perhaps it is better to use the “best” business loan advisor rather than the “cheapest” business loan advisor.

The most typical range for commercial loan retainer fees is $2500 to $10,000 (obviously a wide range). There are various reasons for a retainer fee and here are three of them: (1) to compensate the advisor for some of the initial loan processing; (2) to serve as a “good faith” deposit toward the overall commercial financing fees; and (3) to focus the borrower on working with one business loan advisor. The third reason might be the most important of all. With difficult commercial loans, it is extremely counterproductive for a commercial borrower to be working with multiple business loan advisors (regarding the same loan). Once a retainer fee has been paid, a commercial borrower is likely to be more comfortable in working solely with the business loan advisor who received the retainer fee, and with difficult commercial loans, this unified approach is likely to be more successful. It is this success that ultimately justifies the retainer fee.

Commercial Loan Refinance – Timing is Critical

We are often are asked when is the optimal time to refinance a commercial real estate loan. Many factors such as market interest rates, prepayment penalties, existing loan terms and the overall goals of the borrower come into play. There are however no set answers, but below are some real world thoughts on how you might analyze your own commercial refinance.

Traditionally, the analysis to keep an existing loan in place or to refinance into a new commercial loan can become very complex. Financial advisors like to use the Discounted Cash Flow method which essentially compares the two loans on the Net Present Value basis.

We have found though, that most commercial building owners are primarily interested in how the proposed loan will:

1. Affect their monthly cash flow.

2. What the closing costs will be and how these costs will affect their equity.

3. What the out of pockets costs will be.

4. How long will it take for the increase in cash flow to “pay back” the owner.

Principal pay down is obviously another important component of any commercial loan. However, for most owners, especially those with highly leveraged properties, cash flow is more pressing than above. This is due to the relative high debt payment versus net cash after all the expenses have been paid.

Example 1. Owner occupied office building.

Borrower is 3 years into a 5 year fixed, 20 year amortized loan and is considering refinancing into a 30 year fixed, 30 year amortization commercial loan. The borrowers primary motivation is a desire to increase cash flow to help businesses overall profitability. In addition the borrower has concerns over future rate increases when the existing loan balloons

Existing Loan – 5 year fixed 20 year amortization.

Property Value $1,500,000

Current Loan Balance $1,075,000

Original Loan Balance $1,125,000 (Purchased building with 25% down)

Current Loan to Value 72%

Current Equity 28% or $420,000

Interest Rate 7.25%

Monthly Payment $10,418

Proposed Loan – 30 year fixed, 30 year amortization. Borrower is planning on rolling as much of the closing costs as possible into the loan amount to reduce “out of pocket” cash.

Property Value $1,500,000

Current Loan Balance $1,075,000

Closing Costs $19,638

Proposed Loan Amount $1,094,638

Proposed Loan to Value 73%

Interest Rate 8%

Monthly Payment $8,582

* Closing Cost Break Down (Title at $2000, Lender Legal Fees $2000, Origination Fee at 1% or $10,838, Appraisal $3,000, Environmental $1,800).

Increase in cash flow is $1,835 per month or $22,028 annual. Essentially, from a cash flow perspective, the borrower would recoup the costs of loan in less than one year, despite the rate increase by 75 basis points. Although the borrower would have to pay for the appraisal and environmental report upfront, they would be “refunded” for these costs at close if desired.

In our experience most business owners would be very interested in pursuing the proposed refinance.

Example 2. Investment Property, 10 Unit Retail Center.

Borrower has owned the property for 7 years and has two loans on the subject property. First loan is a conventional floating rate loan that adjusts annually, amortized over 25 years and the second is seller held. It is amortized over 20 years and has a fixed 20 year rate. Neither loan has a balloon provision; however the first loan does have a prepayment penalty of 5% of the remaining loan balance, which is in effect for 3 more years.

Property Current Value – 9% Cap $2,600,000 (Purchase for $2,300,000)

Combined Current Loan Balance $1,635,000

Original Loan Balance, 1st $1,610,000 (70% Loan to Value)

Original Loan Balance, 2nd $230,000 (10% Loan to Value)

Current Loan to Value 61%

Interest Rate, 1st 6.65%

Interest Rate, 2nd 7%

Current Debt Coverage Ratio 1.27

Net Operating Income $235,000

Combined Monthly Payment $15,448

Proposed Loan – 10 year fixed, 30 year amortization. Borrower is planning on combining the two loans together and wants the security of having a fixed rate loan. Borrower also wants to roll in as much of the closing costs as possible into the loan amount to reduce “out of pocket” cash.

Property Value – 9% Cap $2,600,000

Combined Current Loan Balance $1,635,000

Closing Costs $83,500 *

Proposed Loan Amount 1,735,568

Proposed Loan to Value 67%

Interest Rate 7.5%

Current Debt Coverage Ratio 1.54

Net Operating Income $235,000

Monthly Payment $12,743

Closing Cost Break Down (Pre Pay $72,500 [5% of 1st loan amount], Title at $3000, Lender Legal Fees at $2,200, Origination Fee at 1% or $17,185, Appraisal $4,000, Environmental $1,800) .

Cash flow increase is $2,704 per month or $32,449 per year while the cost to close the loan is high at $83,500 due primarily to the prepayment penalty. The borrower is facing a closing cost payback period of over two and a half years. In addition the interest rate has gone up considerable on the proposed loan, which of course increase the overall cost of the loan.

Not an easy decision for the borrower. The option to go forward would probably rest heavily on the borrower’s opinion of where the future interest rates will be when the prepayment period ends.

It is interesting to note that the borrower would be able to increase his loan amount to $2,333,964 (cash out proceeds would be approximately $598,000) if he choose too. This is due to the increase in cash flow. The building Debt Coverage Ratio would improve to a 1.54 – the typically minimum is DCR is 1.2. If the borrowers intent was to pull cash out of the property to inject into another property (or for any other reason) this would probably be a much easier decision to go forward with the loan.

Commercial Loans – Cost Effective Way of Funding Business Needs

When your little idea, your dream starts taking a real shape – you know it is time you garnered your finances to make it grow. At times your effort fall short and there you are filing for loans. Commercial loans can help business interests with uninterrupted capital supply.

Commercial loans can be used to buy business premises or commercial building for both new or establish businesses. They can be used to buy any business asset or to finance the expansion of any established business.

Different commercial loans lender have different way of processing commercial loans. You can start with pre-qualifying for commercial loans. This determines how much as a borrower you can afford as commercial loans and which commercial loans programme will suit the best.

Commercial loans are the biggest way of financing business projects. While providing you with commercial loans, the loan lender will look at general information as your income and existing debts. Your application will be reviewed by a loan officer.

Commercial loans lender will take keen interest in

o Credit history

o Reason for loan

o Collateral

o Ability to repay

o Your investment in the business

Documents to gather while applying for commercial loans are –

Loan request – the amount of loan requested, how the funds will be used, loan type and amount of working capital on hand. Commercial loans lender will feel more secure knowing that you have invested your own money in the commercial plan.

Business plan – If the commercial loans are used for starting a new business, the business plan is crucial. It should include cash flow projections for first 24 months. Information should be concise and clear. Its feasibility will be fundamental in getting commercial loans approved.

Personal financial statements – In case commercial loan is used for expansion of business, it will be required for you to give business profile. Personal financial statements would be required for anyone who owns 20% or more of business. Complete information about current debts balances, payment schedules, maturity, and collateral used to secure other loans. You can be required to provide more documents during the loan process.

In case you are purchasing real estate, you might be required to submit preliminary environmental reports, area maps, title reports, property appraisals, and lease summaries.

Decisions for commercial loans take usually 1-5 days. During this time, you might be required to give further information. Commercial loans broker can help you submit your loan application to several lenders for approval. Your job is to select the most attractive offer and returning the final letter of intent. After all the conditions are satisfied, the commercial loans are approved and the lender will give a final loan commitment. At the closing, the commercial loan will be transferred with a cashier’s check, draft, or electronic wire transfer.

Commercial loans are either secured or unsecured – with or without collateral. Secured commercial loans are more commonly available as commercial mortgages. Commercial mortgage are provided at better terms, interest rates and repayment options. Commercial loans are available with fixed and variable rate options. Fixed rate commercial loans will mean that your interest rate and monthly payments will be fixed at the beginning of the loan and will remain so throughout.

Businessmen apply for fixed rate commercial loans for it helps in effective financial planning because they know how much they are giving out every month. With variable rate the interest rates changes in accordance to the changes in the market. The benefit with variable rate is that they start with lower interest rate than fixed rate. But interest rate can increase during the term and therefore you will have to pay more. On the contrary fixed rate commercial loans will leave no space for change in case the interest rates drop.

Investigate before you make a commercial loan claim. Be prepared to answer some questions. Commercial loans are cost effective way of funding business needs when you need it. Commercial loans can strengthen your competitive position; increase your working capital and maximum profitability. Investigate your opportunities with commercial loans and see how your business becomes a commercial success.

Bad Credit Commercial Loans – Procuring For Commercial Needs

If you think shopping for commercial land is not a cup of coffee for you then with bad credit commercial loans make it easy. While availing for bad credit commercial loans, borrower must be aware of his credit record as it’s of the utmost importance.

Bad credit commercial loans are especially designed for the borrowers who possess bad credit score to their credit history. Well, it’s true that bad credit scorer is always asked to pay high rates while procuring loans from the financial market. But, if carry a suitable search then he can avail bad credit commercial loans at competitive rates.

Bad credit borrowers are those who are tagged with bankruptcy, arrears, defaulters, IVA, and CCJ’s, in their credit account. With bad credit commercial loans borrower’s can easily meet their commercial needs and desires.

Bad credit commercial loans can be used for any commercial purpose. Some bad credit borrowers use commercial loans for investing in the existing business for expansion or up-gradation, buying a commercial land, starting with a new business, buying of raw material machinery etc.

With bad credit commercial loans, borrowers can avail either of two option secured and unsecured. To obtain secured option of bad credit commercial loans, borrowers have to pledge a security against the loan approval. Borrower is allowed to pledge the valuable asset as security that can fetch good monetary value for your commercial venture. Bad credit borrowers can avail the loaned amount ranging from £ 50 000-£5 00 000 for easy repayment option of 5-25 years.

If the borrowers don’t possess any valuable collateral then he can opt for unsecured option of bad credit commercial loans. In the unsecured bad credit commercial loans borrowers can avail the loan amount ranging up to £1 00 000 for the repayment tenure of 10 years.

Bad credit borrowers can also take up commercial loans from conventional or online mode. Conventional mode includes physical market that compromises of banks, financial institutions, leading lenders or private lending society. With online mode, borrower can avail bad credit commercial loans at an ease. Single click lands the borrower onto the financial market where can select the best option that offers higher rates at affordable deals. But, for that borrower is required to carry down a proper research and comparison.

Today, availing commercial loans with bad credit is no more a challenge as bad credit commercial loans are easily available to procure commercial needs.