Commercial Loan

There are many companies to choose from when applying for a commercial loan and the list seems to grow more and more. Your local bank is no longer the only source for your growing company needs. Companies such as LendingTree are based on hard competition and can give you information online. They quote as much as $100K and up for commercial loans. They offer pre-approval within 48 hours after applying. You must input your requested loan amount, estimated property value, property type and so on. You are also required to give your contact information and a loan specialist will contact you. This method may be the best way for saving busy business owners valuable amounts of time. LendingTree will do the comparison shopping for you by generating a list of commercial lenders. More than 200 lenders are in their network of both regional and national banks. Be prepared with your own information such as recent pay stubs and last year’s tax return. The process works because it all started from frustrated customers who didn’t have time to find the right lenders. The company was then started on the Internet to find lenders, both personal and commercial lenders, to match them with borrowers. LendingTree, as well as other companies, also offer regular newsletters of which the public can subscribe for free. They keep businesses and individuals alike abreast of current lending news from their company.

The list of commercial mortgage lenders is long and very searchable for those who are ready to make a commercial loan commitment. Other companies such as Nationwide Unsecured offer just what their name implies: unsecured loans. Knowing your company’s needs and what type of commercial loan you are looking for is the place to start when researching commercial financing options and services.

Depending upon your commercial loan needs, companies such as Wachovia offer specific types of commercial financing. Their commercial mortgage lenders focus on the details of your expanding real estate or on the new buildings you may need to acquire. This includes working capital that needs to be factored into your business needs. Their commercial lines of credit offer the borrower a short term plan where funds are available and repaid as needed. They try to work with your company’s cash flow to find the best repayment commercial financing plan, including structure terms. This tailor-made type of commercial lending offers flexibility and greater options to borrowers who are in the market for commercial mortgage lenders.

A specific type of financing offered through Wachovia is for borrowers with a car dealership. It is called floor plan financing. This type of commercial financing is suitable for the entirety of your inventory. It is a wholesale type of commercial financing that blankets its approval and offers unique updating features that can be done on the Internet. Although more specific in nature, this example shows how commercial lenders are out to meet your needs, no matter what the business. Broker services are also available to business owners for commercial financing needs. This same company offers a service for letters of credit for those businesses which are involved in export or import services or who need to be secure from other businesses that are unknown to them. The letters of credit work between the customer and the bank when payment is made. This is yet another example of commercial lending practices that customize their services for the business client for all of their commercial financing needs.

You will need to prepare a checklist of information for your commercial lenders. Come to the table fully prepared with copies of all of your documents and help speed up the commercial loan application process. Some commercial lenders may only require one year of income statements and tax returns, while others will require more. It is a good idea to bring at least three years of financial information with you. Bring both personal and commercial financing information, as a commercial lender may need to look at all of your financial statements to make the best decision. This includes both federal and state tax returns with copies of attachments. Along with these financial papers, also bring along a balance statement of your year-to-date profit and loss. This is a very important record to have in your file for all commercial lenders, including commercial mortgage lenders, when considering the right commercial loan for your business. In addition to your year-to-date data, you will need to include 12 months worth of projected cash flow statements for the year. Be realistic and honest with your figures so that the commercial loan you are applying for is as accurate as possible to best meet your commercial financing needs.

Other data that is needed for your commercial loan application includes pro forma for the year and for the length of the loan. Commercial lenders can best serve you when you supply them with as many details as possible. Your previous business operations will be key in aiding the best commercial financing decisions for your commercial loan. Commercial lenders, including commercial mortgage lenders, also require a collateral sheet. This can further be determined between you and your commercial lending specialist when you supply your commercial loan papers. In addition, bring your well written business plan to the table. If needed, acquire help for writing this important commercial loan document. A well prepared presentation will leave commercial lenders with a fresh and positive impression of you and of your business.

Commercial financing options can seem almost limitless. Commercial lenders now offer a wide variety for the types of commercial loans they offer. Businesses that deal in contract work or that have large inventories may look into credit lines of commercial financing. This type of commercial loan is meant to fill temporary needs such as when a business is waiting to collect payment for an exported good and the timing is delayed. Next in line is the short term loan for commercial financing. Short term refers to one year or less and is used for seasonal purposes. The borrower pays back the loan in a one sum amount to the commercial lender when the profits come in for the business. For working capital needs, a commercial lender may issue an asset based loan. Funds are advanced to your business on a percentage basis according to current assets. Commercial lenders may also grant a contract financing commercial loan where funds are supplied from the commercial lender as contracted work is satisfied. Payments are then made directly to the commercial lender.

When businesses are unable to receive commercial financing, they may rely on factoring for their commercial loan needs. Your customers are the customers of the factors because they purchase what is received by your company and then rely on their own system of credit. This is a creative form of commercial financing which allows a greater expansion of availability for commercial loans.

Commercial banks offer term loans as a major type of commercial financing. If your business is in expansion, needs new equipment or needs to finance its working capital, then a term loan may be the right commercial financing for you. Other uses may be listed under term loan use such as refinancing and acquisitions for your capital needs. Commercial mortgage lenders will look intently at what your projected cash flow and profit is to help determine this commercial loan application.

Real estate and equipment loans are secured loans. For real estate, the commercial loan may be up to 75% of the value of the property that is being commercially financed. For equipment, the commercial loan is repaid over the life of the equipment at 60% to 80% of its value. These commercial loans look at a repayment schedule of 10 to 20 years. A second mortgage may also be made for this type of commercial loan. The amount of the commercial loan financing is based upon the first mortgage and the appraised market value. Another long term commercial financing loan option is leasing. Three types of commercial lenders may offer leasing: banks, leasing companies and finance companies. The commercial loan term is usually from 3 to 5 years and the borrower may then decide to purchased the lease product, renew it or return it. These commercial loan options continue the flow of diversity and resource-abundant commercial financing alternatives.

An example of a fixed commercial loan is a 3 to 15 year balloon loan. The interest rates are fixed for a number of years and terms are usually for 3, 5, 7, 10 or 15 years. Fee schedules are set up for 20 or 25 years in most cases. The balance of the balloon loan is due at the time of its maturity and the commercial loan borrower may refinance or sell the property to pay for the commercial loan. An adjustable rate loan is different from a balloon loan. Commercial loan adjustable rates are adjusted at a certain time. This adjustment comes at either the current rate of index or the prior year’s average index. This is an interesting commercial financing option. The borrower may decide upon a fixed period for a certain amount of time and then an adjusted period after that for these commercial loans. After the fixed rate comes to term, the adjusted rate will continue each year thereafter. The one year treasury rate is used for such an adjustable rate commercial loan.

Commercial mortgage lenders will review the details with you when you apply for your commercial loan. Risk profit analysis is a determining factor when delving deep into commercial financing decisions. Federal standards must be met by all commercial lenders, but other factors such as fees are less standardized. Your commercial mortgage lender will have guidelines that you must follow as a borrower. The accuracy of your commercial loan will go a long way when the right commercial financing decisions are made based on the important data that you have provided.

Commercial financing is required by all types of commercial businesses. If you are looking to set up a commercial business and wish to apply for commercial loans, then here is a common list of commercial property types that you may want to consider. Commercial mortgage lenders will help determine your commercial financing needs by looking into the risk analysis factors of your business. Apartment rentals carry the least amount of risk to commercial lenders. They must consider vacancy rates, but this is still a wise commercial investment for many business-savvy individuals. The types of rental property may include single tenant rentals, student rentals, senior living apartments, and hi-rise and mid-rise apartments. The last few are for multi-family living spaces. Office rental space is another popular and useful commercial financing venture. This could be for heavy or light manufacturing needs, warehouse and distribution sites, storage units, and owner occupied office living spaces or for other special purposes.

Looking at larger commercial financing units, one might consider retail space from a mortgage lender. Strip malls, outlet malls, free standing structures and regional enclosed or unenclosed buildings are included in this listing. Your commercial financing needs for such retail enterprises can easily be determined by your commercial mortgage lender. Our list of larger commercial financing options continues with health care facilities. Nursing homes, rehabilitation centers and congregate living facilities are all considerations when looking into business options and commercial financing decisions. Commercial mortgage lenders may just be your best source of information and advice with such concerns.

Start by asking yourself useful questions concerning your commercial loan needs. What are you comfortable with based on your past business decisions, growth or losses? You know best what types of commercial financing you will consider. For instance, what kind of rate are you most familiar or comfortable with? Do you feel confident about your repayment history of other loans, whether commercial loans or personal loans? Next, look at the term of the commercial loan. Is your business seasonal and only requires short term financial assistance? Perhaps you have large amounts of contracted work and choose to look into an intermediate term commercial loan. Is your business large? Do you require a long term commercial loan in order to keep your equipment running smoothly or in order to purchase other properties?

Ask yourself how much money you really need to run your business. Look at your business plan again and make revisions wherever they may be needed. Does your business plan and your projected cash flow still hold true to what you thought in the beginning of your business? What is the balance that you need between under borrowing and over borrowing? Have you talked with more than one commercial lender for your commercial financing needs? Have you considered the commercial mortgage lender’s set of rules? Look at your collateral. This must equal the amount of the loan at a minimum when you are applying for your commercial loan. Along with this, analyze your personal and your business credit rating scores before the commercial lenders do. They will certainly examine this essential commercial loan information.

Three important ratios are considered when commercial mortgage lenders consider you for a commercial loan. The first is the Loan-To-Value Ratio, or LTVR. This equals the total loan balances of all of your mortgages and divides it by the fair market value when you have your commercial property appraised. The fair market value is the price at which both you the seller and your buyer agree upon in order to proceed with the sale in business. Your commercial lender will want to protect him or herself against default, so the LTVR will rarely exceed 80%.

The second ratio in commercial loan considerations is the Debt Ratio. The commercial mortgage lender will look at the income of your business and then the amount of debt you must pay each month. Your bills are called debt obligations and are divided by your monthly income to come up with your Debt Ratio. Debt ratios must be kept low. They may not exceed over 40% in most cases.

The third commercial lending ratio is the Debt Service Coverage Ratio, or DSCR. This is only used on large loans. Your commercial property must be producing an income, such as from an apartment building. There are two parts to this type of ratio: net operating income and debt service. Operating expenses can be high for rental property. The net operating income is what income your business has left after paying for repairs, taxes, insurance and all other expenses it takes to manage your property. The debt service is your mortgage payment. The DSCR is figured by dividing the net operating income by the debt service. Commercial mortgage lenders like to see this ratio higher than 1.0. If it is lower, the commercial mortgage lender will know that the net operating income was not high enough for the owner to make a clear profit. These ratios, along with other types of commercial financing, should be considered together with your commercial mortgage lenders and any other commercial lenders that you may contact for your commercial loan.