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Business Opportunity Financing And Business Loan Basics |
By:
Stephen A. Bush |
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There are approximately 25 critical differences between residential real estate investing and commercial real estate investing. Because more residential real estate investors are exploring commercial real estate and business finance opportunities, this business opportunity financing and business loan report is designed to help educate new commercial investors about key commercial mortgage and commercial loan issues.
Business Loan Programs for an SBA Loan
Small Business Administration loan programs are an important consideration in many business financing and commercial mortgage situations. There are also problems and limitations with SBA business loan programs that should not be overlooked. While all business borrowers will not qualify for these business finance approaches, it is probable that many borrowers will benefit from inclusion of SBA loan financing.
Business Opportunity Business Loan Options
Business opportunity financing is unique and complex because it involves the financing of a business without real estate. Due to the absence of real estate, traditional commercial mortgage financing is not possible. The number of potential lenders will be greatly reduced, and key terms such as length of loan and down payments will be significantly different compared to a business loan involving commercial real estate as collateral.
Balloon Payment Requirements for a Business Loan
Some commercial lenders will use balloon payments as a substitute for a true long-term commercial mortgage. With balloon payment terms, a commercial borrower will be faced with a large lump-sum payment that is due after a typical period of three to ten years. At that time, if borrowers are unable to afford such a large payment, they will be forced to either sell their business or refinance their business loan or business opportunity loan.
Short-Term and Long-Term Business Finance Options
It is very common for traditional banks to limit their commercial mortgage and business loan terms to a period as short as three to five years. Longer-term business finance terms are available but only from a relatively small number of commercial lenders. Some specialized situations such as business opportunity financing are typically limited to ten years or less due to the lack of commercial real estate as collateral.
Recall Provisions for a Commercial Mortgage Business Loan
From the perspective of a business owner, one of the most undesirable business loan terms is a recall clause allowing the lender to call the loan early. A lender can require early repayment of the commercial loan under defined conditions when a business financing agreement includes recall terms. The conditions which allow the lender to call the commercial mortgage often include periodic review of financial statements, credit history and tax returns.
Thinking Outside the Bank for Commercial Mortgage Lenders
Business financing situations are almost always more complicated than residential financing. The most competitive lenders for typical business finance situations will not usually be traditional banks. Regional and local banks are currently playing a smaller role in commercial financing and are even less effective in handling specialized business loan circumstances. Business borrowers should restrict their financing search to only specialized business finance lenders.
More Commercial Mortgage Features
The business finance environment in the United States has many factors that distinguish it from residential financing. The factors not described in this report are included in other business loan reports. A few of the topics not included in this report include stated income business financing, the difficulty of refinancing an SBA loan, commercial loan appraisals and commercial financing lockout penalty fees upon sale or refinancing.
Copyright 1995-2007 AEX Commercial Financing Group and Stephen Bush. All Rights Reserved.
Stephen Bush and AEX Commercial Financing provide business financing - commercial mortgage and business loan - business cash advance assistance Don't reprint this exact article. Instead, reprint a free unique content version of this same article.
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Article Source: http://www.statssheet.com/articles/article55830.html |
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