Unfortunately commercial borrowers are generally not
adequately prepared for commercial mortgage and business
loan problems. It is preferable to have advance knowledge
of these business financing difficulties.
The ability to overcome commercial mortgage business loan
problems is increasingly important in the current real
estate investment property loan climate. Business borrowers
should anticipate several potentially critical difficulties
when seeking business financing, and this article will
provide an overview of four key commercial loan issues.
It is not unusual to find that business investment lenders
and business loan brokers are not as forward-looking about
business financing and investing difficulties as most
borrowers would expect, and I have published another
article about commercial lenders to avoid. The focus here
is on four typical commercial mortgage loan and SBA
business loan difficulties often overlooked by commercial
lenders and borrowers.
Unanticipated circumstances can lead to unexpected problems
with a commercial loan, and borrowers should be ready for
these business financing scenarios. There are several
critical commercial mortgage difficulties to be anticipated
and avoided with business financing. Business loan problems
are more serious and prevalent than many borrowers would
imagine.
Some of these commercial mortgage business loan
difficulties might be unavoidable, but in most cases these
business financing and SBA loan challenges can be
successfully overcome. By being aware of these common
commercial loan obstacles, borrowers and their advisors
will be properly positioned to take timely and appropriate
corrective action.
Avoidable Commercial Real Estate Investment Property
Financing Scenario Number One: Use of secondary business
financing -
Many commercial borrowers want the flexibility to use
subordinated debt (a seller second or other secondary
financing) in order to acquire a commercial property or
business opportunity investment with a smaller down
payment. Many forms of business investing will not permit a
seller second or other forms of subordinated debt. With a
commercial loan via non-traditional business lenders, a
commercial borrower can use subordinate business financing
(including seller seconds) to reduce the amount of their
down payment.
Commercial Mortgage Example Number Two: Sourcing-seasoning
assets and seasoning of ownership -
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.
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.
Business Financing Example Number Three: Commercial
mortgage recall terms -
Business loan recall conditions will often allow the
commercial lender to force the borrower to repay their loan
before the normal loan expiration. This possibility is not
relevant to business borrowers if their commercial loan
does not contain such recall terms.
Business lenders regularly include recall clauses in their
business loan agreements. The provisions which will prompt
a recall will vary and typically include annual business
lender monitoring of financial statements, tax returns and
credit history. Without agreed income, tax returns and
credit standards, the lender can choose to require the
borrower to pay off the commercial loan within a very short
period of time.
Contingency Plans for Business Finance Recalls: What to do
about a commercial loan recall -
To avoid an unanticipated recall scenario, commercial
borrowers would be wise to consider only commercial loans
which do not have recall terms. For commercial borrowers
who have recall provisions in their business financing
agreement, it will be equally wise to consider refinancing
their business loan or commercial mortgage before a recall
occurs so that refinancing is accomplished when it is most
appropriate for the borrower.
When borrowers receive a business financing recall, they
must quickly obtain refinancing assistance. When reviewing
commercial loan choices for refinancing, borrowers should
attempt to exclude potential lenders that require recall
terms.
Business Loan Example Number Four: Business financing that
needs a long-term commercial loan -
Is long-term investing and financing really possible for a
business loan? Some business investment lenders will only
offer 5 years (or less) before commercial real estate
financing will expire with a balloon payment due.
If that sounds like short-term investment business
financing instead of long-term, there are business lenders
that can arrange 30-year commercial mortgage loans.
Longer-term commercial real estate financing will often be
the critical difference that facilitates a successful
business investment because a new business loan will not be
required for many years and commercial loan payments will
also be reduced.
Additional Commercial Loan Problems and Solutions -
Unfortunately commercial borrowers will frequently
encounter commercial mortgage business loan problems
similar to those described here. To better prepare for
this, an advisable approach is to explore business
financing resources that will facilitate a better
understanding of complex commercial loan issues. The
Commercial Real Estate Loan Guide and The Working Capital
Management Guide are two examples of business finance
resources that will provide possible solutions for many
difficult commercial financing situations.
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Stephen Bush and AEX Commercial Financing Group provide
business finance - commercial real estate loan help and AEX
Investment Commercial Loan - Commercial Mortgage Reports:
http://aexcfgllc.com
