Avoiding critical commercial mortgage mistakes is an
important but potentially difficult requirement in
obtaining appropriate business finance terms. Commercial
borrowers should expect to secure improved commercial loan
terms and avoid potentially devastating commercial real
estate financing problems by taking some extra time and
caution when using specialized investment financing.
While we will not be addressing all possible commercial
mortgage mistakes in this article, we will include several
of the most severe issues to anticipate. In our experience,
the potential difficulties involving factors discussed
below are more serious and common than most commercial
borrowers are likely to expect.
Inexperienced Business Finance Brokers and Lenders -
Commercial mortgage financing has recently become more
popular with brokers and lenders that previously focused on
residential real estate financing. With the increasing
chaos associated with residential financing, many lenders
and brokers which primarily provided residential mortgages
have been forced to look for alternate sources of revenue.
Many of them are devoting increased attention to business
finance and investment loan services.
While this shift might eventually result in a positive
outcome for commercial borrowers, the immediate impact is a
sudden influx of inexperienced residential mortgage brokers
and lenders attempting to provide investment advice for
business financing and commercial real estate financing.
For most business borrowers, the use of inexperienced
business finance advisors will be a mistake of potentially
serious proportions. As we have written about extensively,
there are approximately 25 major differences between
residential financing and commercial financing, and most
residential financing experts are simply unprepared for
business loan complexities.
SBA Loan Refinancing for a Commercial Mortgage -
Because it is more difficult to refinance an SBA loan or
conventional commercial mortgage than many borrowers
realize, it is advisable to thoroughly review refinancing
options before completing the initial business financing if
at all possible. The biggest potential business finance
mistake involving an effort to refinance is likely to be an
assumption that refinancing can be easily accomplished and
whenever the commercial borrower chooses.
In reality most business and commercial mortgage
refinancing situations will require less attractive terms
than the initial business financing. This is especially
true with SBA loan refinancing because the acquisition
financing contains features that will not be available when
refinancing. Another potentially critical mistake is to
overlook short-term business financing options which will
eliminate refinancing problems.
A major obstacle to refinancing a commercial mortgage,
whether it involves an SBA loan or not, will be prepayment
penalties and other financial restrictions that effectively
prevent refinancing for several years. Even though there
are practical reasons to seek long-term business financing,
shorter-term options should not be overlooked if the
borrower wants more freedom to refinance in a relatively
short period of time such as the first three years of a
commercial loan.
Specialized Commercial Real Estate Investment Property
Issues -
With more specialized commercial properties and
investments, the potential for serious mistakes increases
substantially because of the advanced business financing
complexities. Commercial mortgage loan choices are also
likely to be more limited because there are fewer lenders
which will provide this kind of specialized commercial real
estate financing.
Businesses involving apartments, offices and retail space
are generally considered to be less specialized from a
commercial lending perspective. This is due to the
likelihood that potential users and renters of such
properties are more interchangeable than for a business
investment involving specialized uses such as a funeral
home, golf course and gas station.
The business finance costs for more specialized properties
are likely to be more variable and unpredictable than for
office buildings, retail stores and apartments. For
example, environmental and appraisal requirements for
properties such as funeral homes and gas stations will be
extensive and time consuming.
Solutions and Strategies for Avoiding Business Financing
Mistakes -
The potential business finance mistakes described above can
be overcome successfully. Commercial borrowers should look
for resources which will provide relevant strategies and
solutions for a business owner contemplating business
purchase or refinancing as well as facilitate a better
understanding of complex commercial real estate financing
issues. Business borrowers should thoroughly discuss
business financing options with a business loan expert
before refinancing or buying a commercial property or
business investment.
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Steve Bush is a business finance and commercial real estate
investment property loan expert. Find out more about
commercial mortgage - business opportunity loan strategies
recommended by AEX Commercial Financing Group at =>
http://aexcommercialfinancing.com
