Commercial
How Do Commercial Loans Work?
A commercial loan differs from a residential mortgage in that the collateral used to secure a commercial loan is a commercial building or business real estate instead of a residential property. What’s more is commercial mortgages are generally assumed by a business entity instead of an individual borrower. As a result of this, assessing and securing a commercial mortgage is somewhat more complicated than a residential mortgage. A complex process involving many factors plays into determining creditworthiness for a business. Two of the most important aspects of a commercial mortgage to keep in mind are interest rate and loan repayment schedule.
Interest Rate
Most commercial loans offered today are fixed. This means you have the security of knowing that if interest rates were to increase you wouldn’t be stuck making higher monthly payments. Conversely some borrowers are opting for a variable interest rate to take advantage of lower initial payments. However, a loan of this nature runs the risk of having interest rates increase and thus increasing your monthly payment.
Loan Repayment Schedule
Unlike residential mortgage loans, most commercial loans require a balloon payment at some point during the loan term. This means that after a given amount of time making small monthly repayments, the borrower would be required to make a large final payment consisting of the remainder of the loan. Loan Repayment Schedules which call for a longer time to repay the loan typically have higher interest rates.
Is a Commercial Loan Right for Me?
If you’re considering any of the following as a means to grow your business then a commercial mortgage might be right for you.
Purchase of a building or space in which to do business
Extending current work space
Investing in commercial or residential properties
Developing properties for commercial use
Every borrower’s situation is a little different, so be sure to email or call one of our commercial loan specialists today. We look forward to offering you a personalized commercial mortgage solution tailored to fit your company’s needs.
Qualifications for a Commercial Mortgage
Qualification for a commercial mortgage depends largely on the type of property or building that is being applied for. Despite some specifics on certain properties there are general criteria for qualification. As a business owner it is important for you to be able to show that your company has an appropriate debt to cash ratio. Even a company with a poor credit rating can still receive a commercial mortgage if the primary owner can show good personal credit as well as sufficient liquid assets.
Additionally, your company will need to show a continued and stable pattern of profitability as well as plans for future growth. This might include, but not limited to, copies of your business plan, earning projections and long-term business goals. For a more detailed and personalized assessment of commercial mortgage qualifications please email or call 847-852-6426 today and speak to a loan specialist.