With over 25 major variations, commercial investing involving both real estate and businesses is significantly different from residential real estate investing. This business opportunity business loan article is designed to help inform new business investors about critical business finance issues because more residential real estate investors are considering commercial property loan and commercial loan possibilities. SBA Loan Financing Small Business Administration loan programs are an important consideration in many business financing and commercial mortgage situations. There are also problems and limitations with SBA business loan programs that should not be overlooked. While all business borrowers will not qualify for these business finance approaches, it is probable that many borrowers will benefit from inclusion of SBA loan financing. Business Opportunity Business Loan Options Because it involves the financing of a business without real estate, a business opportunity business loan can be difficult to arrange. Traditional business finance approaches are not workable. Several terms such as down payment requirements will be different in comparison to a commercial mortgage with commercial property as collateral and there will be fewer qualified lenders. Balloon Payment Business Finance Requirements Balloon payments are used by some commercial lenders as a replacement for a valid long-term business loan. A borrower will be required to make a large lump-sum payment that is due after a few years if balloon terms are included. If borrowers cannot make the balloon payment when it is due, their remaining choices include selling their business or refinancing their business opportunity financing or commercial mortgage. Is Long-Term Commercial Mortgage Financing Possible? Long-term commercial mortgage coverage is normally offered by only a few specialized commercial lenders. Business opportunity business loans are typically limited to ten years. Commercial loan terms will be restricted to a three-year period or less by many local and regional banks. Recall Provisions for a Commercial Mortgage Business Loan The ability of a lender to call a commercial mortgage early is permitted if a recall clause is included. This clause allows a lender to require early repayment of the business loan under certain conditions. The circumstances which can result in the lender calling the business finance loan can include regular review of tax returns, credit history and financial statements. Thinking Outside the Bank for Commercial Mortgage Lenders Local and regional banks are not likely to be the best commercial lenders for business opportunity loans and commercial mortgage loans. Traditional banks have recently served a reduced role in most business finance circumstances and are even more restricted in successfully working with specialized business financing situations. Almost all commercial loan scenarios are more difficult than residential financing. A practical commercial borrower should insist on lenders established as business finance specialists. More Commercial Mortgage Features The business finance environment in the United States has many factors that distinguish it from residential financing. The factors not described in this report are included in other business loan reports. A few of the topics not included in this report include stated income business financing, the difficulty of refinancing an SBA loan, commercial loan appraisals and commercial financing lockout penalty fees upon sale or refinancing. Copyright 1995-2007 AEX Commercial Financing Group and Stephen Bush. All Rights Reserved.
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