Commercial Loans and Working Capital Lenders to Avoid

Avoiding critical problems is vital for a small business owner seeking help with commercial loans. Successful working capital management especially requires that problem lenders be avoided for business loans and commercial mortgage financing.

One of the most serious commercial loan situations is a small business commercial lender that causes problems for their commercial borrowers on a repeating basis. Commercial borrowers should be prepared to avoid certain problematic commercial lenders unless alternative working capital loan options are impossible.

This article will not name specific lenders to avoid. This article will focus on how important it is to avoid lenders that cause the problems described below. We will provide several examples to demonstrate why commercial borrowers should be prepared to avoid a number of commercial lenders when seeking commercial mortgages and small business financing.

I have been advising business owners for many years, and I have encountered many commercial loan situations which have involved commercial lenders that I would not recommend as a result. This conclusion is typically based on an obvious pattern of lending abuses by select business financing providers.

As a first example of lenders to avoid, I have published an article which discusses the tendency of many banks to say “yes” when they mean “no”. Such banks will typically attach onerous business financing conditions to commercial loans instead of simply declining the loan. Business owners should explore other commercial mortgage alternatives before accepting commercial financing terms that put them at a competitive disadvantage.

The second example of lenders to avoid involves the commercial appraisal process. For commercial mortgage loans, commercial appraisals are an unavoidable part of the commercial loan underwriting process. The process to obtain commercial appraisals is expensive and lengthy. Avoiding commercial lenders which have displayed a pattern of problems and abuses in this area will benefit the commercial borrower by saving them both time and money.

The third example of lenders to avoid is illustrated by those which provide worthless pre-approvals for commercial loans. Many borrowers think it is important to obtain a business loan pre-approval. The apparent result of the preliminary business financing approval is that it will allow the borrower to make other business commitments which are dependent on the commercial mortgage being approved.

Commercial borrowers should expect that a valid approval will not be regularly issued in a day or so. Any form of commercial financing approval will be treated as a binding action by ethical lenders. Nevertheless there are commercial lenders who provide their own special version of a pre-approval within just a few days of receiving preliminary application information. Because this abbreviated approach to pre-approvals almost always produces unexpected surprises for the commercial borrower as the business loan process goes forward, commercial borrowers need to be extremely wary of any commercial lenders that take this approach.

Why would a lender use a questionable commercial loan pre-approval? Here are two primary possibilities. The first reason is to employ a pre-approval process that resembles the approach used for residential mortgage loans. A second reason is to cause borrowers to prematurely end their financing search due to the often false hope created by an artificial approval.

Since many commercial mortgage loans are arranged by residential mortgage brokers who are frequently unfamiliar with common commercial loan procedures, this reason will be especially applicable when dealing with commercial lenders that specialize in dealing with residential mortgage brokers. This type of commercial lender should be avoided at all costs for most business financing situations.

The fourth example of lenders to avoid is related to lack of sufficient lending competition. It is not unusual for the leading small business lender in some markets to use more restrictive commercial loan terms. Such lenders often take advantage of a lack of other local commercial lenders. It is not wise for borrowers to rely upon local and regional banks for most business financing requirements. A non-local lender can frequently provide better business loan terms for most lending scenarios because they are routinely competing with other business lenders.

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Stated Income Commercial Loan For Your Commercial Property

A sicl is a commercial loan that does not require the full documentation that is required of a full document commercial loan. This type of commercial loan does not require the borrower to be able to prove that they can afford to make the loan payments from their own personal income but instead relies on the rents of the commercial property or the possible rents for the property.

Financial Benefits of a stated income commercial Loan include:

* Less Documentation The stated income commercial loan requires less documentation than a tradional commercial loan. In many cases since the loan is only underwritten to the properties cash flow or potential cash flow it is not necessary to provide as much documention.

* Easier approval process This commercial loan has an easier approval process because it does not have to be underwritten to both the property cash flow and a secondary repayment source such as the borrowers personal income.

secondary repayment source such as the borrowers personal income. Lower credit score requirements Some of these commercial loan programs also have reduced credit requirements.

Examples of a typical stated income commercial loan borrower include:

* A self employed small business owner that does not report all of their income on their tax returns who is looking to purchase a commercial property using a commercial loan.

* A real estate investor that does not show the amount of income necessary to qualify for a traditional commercial bank loan but the property has rental income that will support the debt payments.

Purpose

A stated income commercial loan is designed to help a borrower purchase real estate that they would otherwise be unable to purchase without a significant down payment. The commercial property does not have to be held in the name of the borrower or the operating company but can be held in the name of a holding company.

There are certain criteria for eligibility of this type of commercial loan.

The business that is occupying the property must be in business at least 2 years.

The guarantors credit score must be 600 or above.

The guarantor and operating company can not have a bankruptcy that is more recent than 3 years.

Structure

This commercial loan is only done on a first trust basis although it is possible to have a second trust provided by someone else. There are instances where combined total financing can be close to 100%. This depends on the type of commercial property, credit of the guarantor and other underwriting factors. Closing costs can be financed into the loan under most circumstances.

Easier than you think!

The stated income commercial loan is really meant to help people qualify for a loan without the hassle of providing the full documentation needed on a traditional bank loan.

Rates are slightly higher.

The interest rates are slightly higher for this type of commercial loan but the loans can be amortized up to 30 years.

The stated income commercial loan closes quickly in most cases.

It usually takes about 30 to 45 days from start to finish to close this commercial loan.

Borrowers do not have to use their house as collateral.

It is very rare that a stated income loan will need to use the borrowers home as collateral.

Borrowers with less than perfect credit can qualify.

Borrowers with credit scores as low as 600 can qualify for these programs. If your credit is within 40 points of this number it is possible that you may have some mistakes on your credit that we can help you fix while closing your loan. So even if your credit does not meet the 600 number today, it may when we are done with your loan.

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Commercial Loans – Cost Effective Way of Funding Business Needs

When your little idea, your dream starts taking a real shape – you know it is time you garnered your finances to make it grow. At times your effort fall short and there you are filing for loans. Commercial loans can help business interests with uninterrupted capital supply.

Commercial loans can be used to buy business premises or commercial building for both new or establish businesses. They can be used to buy any business asset or to finance the expansion of any established business.

Different commercial loans lender have different way of processing commercial loans. You can start with pre-qualifying for commercial loans. This determines how much as a borrower you can afford as commercial loans and which commercial loans programme will suit the best.

Commercial loans are the biggest way of financing business projects. While providing you with commercial loans, the loan lender will look at general information as your income and existing debts. Your application will be reviewed by a loan officer.

Commercial loans lender will take keen interest in

o Credit history

o Reason for loan

o Collateral

o Ability to repay

o Your investment in the business

Documents to gather while applying for commercial loans are -

Loan request – the amount of loan requested, how the funds will be used, loan type and amount of working capital on hand. Commercial loans lender will feel more secure knowing that you have invested your own money in the commercial plan.

Business plan – If the commercial loans are used for starting a new business, the business plan is crucial. It should include cash flow projections for first 24 months. Information should be concise and clear. Its feasibility will be fundamental in getting commercial loans approved.

Personal financial statements – In case commercial loan is used for expansion of business, it will be required for you to give business profile. Personal financial statements would be required for anyone who owns 20% or more of business. Complete information about current debts balances, payment schedules, maturity, and collateral used to secure other loans. You can be required to provide more documents during the loan process.

In case you are purchasing real estate, you might be required to submit preliminary environmental reports, area maps, title reports, property appraisals, and lease summaries.

Decisions for commercial loans take usually 1-5 days. During this time, you might be required to give further information. Commercial loans broker can help you submit your loan application to several lenders for approval. Your job is to select the most attractive offer and returning the final letter of intent. After all the conditions are satisfied, the commercial loans are approved and the lender will give a final loan commitment. At the closing, the commercial loan will be transferred with a cashier’s check, draft, or electronic wire transfer.

Commercial loans are either secured or unsecured – with or without collateral. Secured commercial loans are more commonly available as commercial mortgages. Commercial mortgage are provided at better terms, interest rates and repayment options. Commercial loans are available with fixed and variable rate options. Fixed rate commercial loans will mean that your interest rate and monthly payments will be fixed at the beginning of the loan and will remain so throughout.

Businessmen apply for fixed rate commercial loans for it helps in effective financial planning because they know how much they are giving out every month. With variable rate the interest rates changes in accordance to the changes in the market. The benefit with variable rate is that they start with lower interest rate than fixed rate. But interest rate can increase during the term and therefore you will have to pay more. On the contrary fixed rate commercial loans will leave no space for change in case the interest rates drop.

Investigate before you make a commercial loan claim. Be prepared to answer some questions. Commercial loans are cost effective way of funding business needs when you need it. Commercial loans can strengthen your competitive position; increase your working capital and maximum profitability. Investigate your opportunities with commercial loans and see how your business becomes a commercial success.

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