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Business Loan And Working Capital Commercial Mortgage Choices |
By:
Stephen Bush |
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Business Loan and Working Capital Commercial Mortgage Choices
by Stephen Bush
Even though longer-term business financing techniques might be appropriate for many circumstances, there are some important short-term business loan options that will be less costly in producing improved credit card financing and commercial mortgage results for business owners. Short-term commercial financing choices can be misunderstood because of a preference by many business owners for long-term working capital management programs.
Two Important Short-Term Business Financing Choices
The most critical short-term commercial financing techniques typically include short-term merchant cash advance and credit card processing programs and commercial real estate loan programs. Both working capital management approaches are frequently a source of confusion for business owners.
Commercial Real Estate Loan Short-term Programs
A long-term commercial mortgage is possible for most businesses that involve commercial property. Businesses should not normally be totally financed with short-term funds. When a longer-term commercial property loan is desired, a long-term commercial mortgage of at least 15-20 years is suggested.
Nevertheless there will be business loan scenarios where long-term commercial real estate financing is not the best option. When this is the case, a business owner needs to realize that there are practical business financing choices.
When a Short-Term Commercial Property Loan is Appropriate
If a business owner plans to sell or refinance their business within a few years, it is preferable to explore short-term business financing options. The best short-term business loan will have minimal prepayment penalties in comparison to terms commonly included with long-term commercial real estate financing.
While we will not attempt to describe the technical aspects of commercial loan prepayment fees and lockout fees in this article, we will note that the absence of such fees in most short-term commercial mortgage loan programs is a very positive aspect of these short-term working capital management options. The lack of such penalty fees could easily translate to a savings of 10% to 30% or more if a business owner needs to sell their commercial property during the time period which would have triggered prepayment fees and lockout fees in a traditional longer-term commercial mortgage loan.
Short-Term Commercial Mortgage Limitations
There are some trade-offs that need to be understood if a business owner chooses shorter-term business financing even though prepayment fees will usually be avoided with a short-term business loan. When short-term commercial real estate financing is a realistic option, the loan-to-value will usually be no higher than 70%, the commercial mortgage will not be readily available for special purpose business properties such as golf courses and the interest rate will frequently be in the range of about 12%.
Best Possibilities for a Short-Term Commercial Mortgage
The most likely candidates for a short-term commercial mortgage loan are office, retail, multi-family, warehouse and mixed-use commercial properties. The time period typically covered by a short-term commercial real estate loan is six months to three years.
Limited Lenders to Implement Short-Term Business Financing
There are numerous problems to avoid with short-term commercial mortgage programs, so selecting a lender is critical to business owners wanting a short-term business loan. Unfortunately there are very few lenders who are capable of executing short-term business financing successfully.
Business Cash Advance and Credit Card Processing Programs
An underutilized commercial financing strategy for businesses is possibly the best commercial loan strategy to secure cash for their business: a business cash advance using credit card processing. Credit card financing and credit card processing are effective business financing tools that are usually overlooked by any business accepting credit cards as a customer payment method.
Retail and service businesses accepting credit cards can usually benefit from this business loan program. This credit card factoring strategy uses monthly sales volume and credit card receivables to secure a business cash advance.
Credit Card Processing and Credit Card Financing
This working capital management strategy is also known as "credit card factoring". Many businesses have relied upon a working capital loan strategy called "receivables factoring" or "receivables financing" which allows them to sell their future receivables at a discount.
Very few retail and service businesses can properly document their accounts receivable to acquire business financing. Smaller service businesses and retail stores are not likely to have receivables for a business loan.
Businesses accepting credit cards have substantiated credit card sales volume. The documented sales volume becomes an asset to commercial financing for the business. A merchant cash advance up to $300,000 is available based on business sales volume.
The working capital loan time period covered by a business cash advance is typically 12 months or less. For businesses that desire to continue the merchant cash advance program beyond this period, it is usually an easy matter to get an additional working capital cash advance once the initial one has been completed.
Lender Problems and other Limitations with Credit Card Factoring
As with any successful working capital management strategy, there will typically be only a small number of commercial lenders who are effective at implementing the working capital loan strategy properly. There are also a number of problems to be avoided with business cash advance programs, so choosing the appropriate provider of this working capital management service is extremely important to any business owner considering a business cash advance program.
Copyright 1995-2007 AEX Commercial Financing Group and Stephen Bush. All Rights Reserved.
Contact Steve Bush at The AEX Commercial Mortgage Loan Guide for business loan solutions This article is available as a unique content article with free reprint rights.
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Article Source: http://www.statssheet.com/articles/article54968.html |
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