Questions to Consider, Facts to Know Before Applying for a Commercial Loan
We write at length about a Florida home loan, what you need to know before applying, where the current rates stand, etc.
But as investing heats up and the real estate business is in full swing, what about a commercial loans? What should you be made aware of before agreeing to terms on these resources?
For starters, commercial mortgages are typically offered with higher interest rates than residentia
l mortgages and they frequently have very short terms. Factors such as whether you go through a mortgage banker or a mortgage broker for your commercial loan, along with whether the property is being purchased for your small business or your private investment can determine your success in financing the property.
“Banks are very stringent. They have certain property types that they like. There are certain property areas that they like to lend in,” says Thomas Preston, Senior Loan Officer, Bayview Financial.
Typically, commercial loans are based on more than just the credit report of the person applying for the loan. If it’s for your business, various factors will come into play:
- How viable is the company
- How long you’ve owned the it
- How financially strong is the business
- What is your experience in the field
While personal finances are vital, if the purchase is a commercial property that can generate income, such as a hotel or apartment building, less emphasis is put on the personal aspect.
Because the failure rate of small businesses is very high, loan officers look at other factors, including how comfortable the lender is with the type of business and industry demographics. Certain businesses, because of the backing of larger companies, may have a lower failure rate and, therefore, the ability to qualify for a commercial loan easier.
When you’re shopping for your commercial loan, it’s best to get an expert involved early in the process. It can be tricky to find the right lender because commercial lenders specialize in different types of industries. Their niche-market is usually dictated by the secondary market and its institutional investors who have a model for the types of loans they will buy from primary lenders.
As you can tell, may of the same rules apply for a commercial and a Florida home loan. You should always be aware of your options and consult with an expert in the field before signing on any dotted lines. Choosing the best mortgage in either industry can be tricky, but far from impossible.
