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Business Financing Challenges - Commercial Loan Solutions |
By:
Stephen A. Bush |
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Business Financing Challenges - Commercial Loan Solutions
by Stephen A. Bush
It is not unusual to find that business lenders and business loan brokers are not as forward-looking about commercial financing difficulties as most borrowers would expect, and I have published another article about commercial lenders to bypass. The focus here is on some of the typical commercial loan difficulties often overlooked by commercial lenders and borrowers.
Unexpected circumstances can create chaos with business financing, and commercial borrowers should be prepared in advance for these commercial loan possibilities. There are a number of business financing problems to be avoided with a commercial loan. Difficulties with a typical business loan are probably more common than most commercial borrowers realize.
Although some of these obstacles might be unavoidable, in most cases these business loan challenges can be overcome. By anticipating these recurring business financing problems, commercial borrowers and their advisors will be more able to take corrective action before it is too late.
(1) Proactive Commercial Loan Example Number 1: Seasoning of ownership and sourcing-seasoning assets. This commercial mortgage difficulty will not matter to all borrowers. When it does apply, business borrowers should insist on a lender without seasoning and sourcing requirements.
Some commercial lenders will require borrowers to document the source of the down payment for a purchase (sourcing). Commercial lenders will also frequently require that business financing down payment funds be substantiated, most commonly for 1-12 months (seasoning). Seasoning of ownership is based on the minimum time a commercial property must be owned before refinancing can occur.
(2) Difficult Business Financing Situation Number 2: A borrower wants to use a substantial amount of subordinated debt (a seller second or other secondary financing) to reduce the amount of cash needed to purchase a commercial property.
Many commercial loan programs will not permit a seller second. With business financing through less restrictive commercial lenders, a borrower will be able to employ a seller second and reduce their down payment needs.
(3) Proactive Commercial Loan Example Number 3: Business financing that needs a long-term commercial loan. Is long-term financing really possible for a business loan? Some lenders will only offer 5 years before commercial real estate financing will expire with a balloon payment due.
If you think that describes short-term commercial loan terms rather than long-term, you will be pleased to discover the lenders that will provide 30-year business financing. A long-term business loan will frequently be the factor that creates a successful commercial investment scenario because a new commercial mortgage will not be needed for many years and monthly payments will be substantially decreased.
(4) Avoidable Commercial Mortgage Scenario Number 4: Business loan recall provisions. Commercial loan recall covenants mean that the business lender can force the borrower to repay early by calling the loan before it would normally expire. This potential concern is not applicable to all borrowers since some business financing agreements will not allow a loan recall possibility.
Traditional lenders frequently put recall clauses in their business financing provisions. The conditions which can trigger recalls differ and include regular evaluation of credit history and financials by the commercial lender. If required levels of credit standards and income cannot be confirmed, the lender will enforce the recall provisions by requiring an early and immediate payoff of the business loan.
Business Financing Recall Contingency Plans: With a commercial loan recall, borrowers will need to refinance with a lender quickly. Prudent borrowers will exclude lenders that require recall agreements when evaluating business loan refinancing options.
To avoid this undesirable recall possibility, commercial borrowers would be wise to include only business financing without recall terms. For borrowers with recall terms in their current commercial loan, it will be equally wise to consider commercial mortgage refinancing prior to an unanticipated recall.
Copyright 2005-2007 AEX Commercial Financing Group, LLC. All Rights Reserved.
Steve Bush provides candid commercial mortgage - commercial financing advice. Sign up for a free series of Commercial Loan reports You are welcome to reprint this article - but get your own unique content version here.
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Article Source: http://www.statssheet.com/articles/article53890.html |
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