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Commercial Property Loan

Commercial, Property, Loan

Commercial Property includes any land, building, hotel, stores or facility that is used for business or is available for sale for the purpose of starting a business. It clearly indicates that it is used for the purpose of making funds.

Commercial property loan is a term used for financing the business. It is a primary method that is used to own a commercial property. Whether the finances are required for running a new business or merging the business or expanding it for further growth but it has to be commercially used.

Commercial property loan can be a secured loan or unsecured loan. In secured loan, the lender keeps the commercial property as collateral to make sure that the borrower pays the monthly installments on time. It is a risk-free deal for the lender as he can always sell the property if the borrower becomes default in making payment. On the other hand, personal loan is generally referred to as unsecured loan. It carries many benefits for the borrowers as the lender does not need any property as collateral and tax returns are not required. Above all, it takes less time for the process to follow and can get the approval at a very short notice. The lender just needs to do the credit check to approve the loan. Thus, it involves less risk for the borrower.

Commercial property loan mostly carries low interest rates but it is affected by several factors. If the borrower has a good credit history and the business is very profitable, the interest rate is expected to be low. The span of the loan is likely to be lengthy with low interest rate and the lender keeps the commercial property as collateral. The span is generally 25 to 30 years and the borrowers age should be approaching 65 by the time the term of the loan expires. The interest rate can be fixed rate or adjustable rate. In fixed rate, the amount or the interest rate remains the same for the term of the loan. In adjustable rate, the interest rate keeps on changing with the change in the market trend.

Another important aspect while applying for a business loan is to illustrate the business plan to the lender. He would like to understand that how the business is going to be profitable or could make good money so that the borrower can make the loan payments. If the borrower has a running business, the lender would like to see the revenue generated in the past few years. Once the lender is contented, the borrower can have success in achieving the commercial property loan.

Shopping for a commercial property loan could be a complicated process. The required procedure needs to be followed for the approval of the loan. To start with, it is vital to acquire the optimal broker or the bank that can provide low interest on the commercial property loan as every broker gives a different quote. The research can be done by meeting various brokers or by filing the application online with numerous websites on the internet. Other sources of lenders could be credit unions, mortgage banks, wholesale lenders and portfolio lenders.

Online loans are easy to shop and provide lot of convenience to the borrowers. Sometimes they offer instant pre approval and quotes. Online help is also available 24 hours to talk to the experts who can answer all the queries. But whether its online or traditional method, once approved, the process has to be same.

The lender would need following documents for analysis:

• Credit Report
• Collateral papers
• Leaf stating business profile
• Organization documents
• Sale and purchase agreement
• last 3 years tax returns
• 1003 Application
• loan supplement form
• Proof of Insurance and,
• Recent Bank Statements

Once the documents are analyzed and the loan is approved by the broker, the borrower is advised to sign the documents and make a down payment. There are various zero down payment schemes available but that involves high interest rate and also added insurance on the loan amount, if the borrower becomes bankrupt. Generally, the borrower has to pay 20% down payment i.e. 20 percent of the total loan value. Brokers can make up to 90 percent Loan to Valuation (LTV) and if 20 percent payment is made then LTV happen to be 80 percent. The loan can be released in the form of check, draft or electronic wire.

With more and more financing companies available, it’s easier than earlier days to find the best and productive option. An online search can produce numerous results. Surf the results and surely the borrower can yield constructive offer. Once the borrower is delighted with the offer, work with the lender to acquire the loan.

As commercial property loans are meant for the business group, it is the best available option for the ones who need financing for their ventures.
Published: 2007-03-29
Author: Prerna Anshul Panwar

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