Commercial loans are obtained for many different business ventures. For this reason there are different types of commercial finance. They in general, is for the purchase of property. It is like a loan to buy a home. The property becomes the collateral to secure the loan. Upon the pay off of the loan the business owner will then own the property. Additionally, like a home loan, a business owner can use the equity in their property to get future loans.

The first type of commercial finance is called an owner-user loan. This type of finance would be for property that will be used to conduct business. Some examples include a doctor buying a building to house his practice or a bookstore owner buying a building from which to conduct their business. Most of these are start up for a business just starting. One issue with these loans is that since the business is just starting there is no record of the business dealings. The bank will use the business owner’s personal credit to qualify them for the loan.

The second type of commercial finance is an investment property loan. This type is used for businesses where the actual property will be used to make the revenue for the business. Some examples are a building which will house a shopping mall or an apartment building. Many of these loans are start up loans, like with the owner-user loans, so again the lender will base their decision upon the business owners personal credit. However, many of these loans are for business owners that own a chain of buildings all operating the same basic business. In this case the business would be established and the loan could be done under the business name.

The last type is a hard money loan. These loans are for development projects. Some examples are older buildings bought for rehab or a group of houses bought to convert into apartments. These types of loans are often given to development or building companies. These companies fix up the properties and then resell them. These loans usually are set up to avoid early payoff fees and other fees associated with paying off a loan early. The banks enforce these fees so they do not lose out on making the interest money they would should the loan be paid for the full term.

Whatever type of commercial loan a business owner is taking out, they should go to the lender prepared. They should understand the basics of the type of loan they are wanting so they can properly be prepared to negotiate terms. They will also be able to look over the terms and make an informed decision about it.

By: James Copper

About the Author:
James Copper is a writer for http://www.commercialfinancespecialists.co.uk where you can find information on commercial finance

Many borrowers are pressured to close quickly once they find the commercial property that they are looking for. The seller typically wants to close faster than possible and the borrower wants to make sure they have done all of their due diligence before closing. The key to a quick close is complete and accurate information. The problem is that most borrowers do not know what they need in order to get a complete and accurate loan application until they first talk to a lender. If you have all of this information ready before you even meet a lender you can shave 2 weeks or more off of your closing time. A complete and accurate application package will get you a quick answer, an interested loan officer, and faster closing.

Lets look at what a typical owner-occupied real estate owner will need to submit:

1. A Complete Address and Color Photos of the Subject Property – This is the initial eye grabber for the lender. Take time to get a good photo. If the property looks run down, the lender will have less interest in the property. Do not send a picture from Google Maps or from some other random source. Go out and get a good photo of the property

2. A Complete Personal Financial Statement (PFS) – The lender wants to see what personal assets and liabilities the borrower has. They will pull this off of a personal financial statement. A universally accepted PFS for owner-occupied commercial real estate is the SBA Personal Financial Statement. It is a quick 2 page form and can be filled out very quickly.

3. A Tri-Merge Credit Report – The lender needs this to check the borrowers credit score, but also to compare with the liabilities that are listed on the PFS. Make sure that both match up. If you know you have derogatory items on your credit report or late payments, be sure to have a written explanation for each item. you WILL be asked for this and if you can supply it on demand it will look very good to the lender. You will earn their trust because they see that you take care of your credit and know what is on your credit report.

4. A Resume on the Borrower – The lender will want to see what experience the borrower has in their field of work and with the property type of the subject property. Take time to make sure you can show sufficient experience with both. I have seen lenders turn down exceptional borrowers who have not taken the time to show their experience and make their resume stand out. This is time well spent. Many lenders will also want to see a schedule of real estate owned as part of your resume. This will give them an idea of your experience as a commercial property owner.

5. Business History – This is the chance to sell your business and yourself. There are many forms out there where you can fill out information. If you can avoid this and come up with your own business history, it is time well spent. Talk about how it was started, goals you have reached, direction for the future, past trials and how you overcame them, explain your competition and why you have an edge on them, tell about awards, show increased revenue and profits, and be ready to explain a decline in revenue or profits. If the lender can see that you know your business and industry they will have more confidence in you as a borrower.

6. 3 Years of Personal Financial History – This is typically shown through your last 3 years of filed personal tax returns with all schedules. Most lenders will also want to see the last three months of bank statements so they can show a paper trail of your liquid assets stated on your personal financial statement.

7. 3 Years of Business Financial History – This will include the last 3 years of filed business tax returns as well as the last 3 years of business financial statements (profit & loss and balance sheet). They will also want to see the current year business financial statement or YTD financial statements within the last 30 days. Lenders will also request a business debt schedule and in some cases AR and AP aging reports.

8. Executive Summary Detailing Financing Needs – While this is not always necessary, a clean and detailed request in writing is always nice for the lenders to have on file. They are working on multiple deals simultaneously and appreciate being able to refer to this when they do not remember every detail.

I have seen borrowers that have had this information ready and others who have not. Who do you think has had faster closing times?

By: Chad Pitt

About the Author:
Posted by Chad Pitt
Sr. VP of Commercial Alternative
(714) 594-3426
cpitt@commalt.com
http://www.commalt.com

Commercial mortgages can provide all the funds your business needs with very reasonable loan conditions.
Secured business loans are becoming more and more common among businessmen as small companies begin to own their own commercial offices and headquarters instead of renting. Thus, they can take advantage of real estate by obtaining finance through secured loans. But, they can also use as security their future sells, thus obtaining finance with alternative forms of collateral.

Real Estate Based Business Loans And Lines of Credit

There are business loans that are secured with real estate properties just like regular mortgage loans and home equity loans. The sole difference is that these properties belong to a company instead of a particular person.

Nevertheless the concept is just the same: the property’s value guarantees repayment of the money to the lender and thus reduces the risk of the transaction letting the lender offer lower interest rates and more advantageous loan terms.

There are commercial mortgages (the equivalent to home mortgages), commercial second mortgages (the equivalent to home equity loans) and commercial lines of credit based on equity which are just like home equity lines of credit. Equity is the difference between the value of the property and the amount of money borrowed that the property is already guaranteeing.

However, commerce and companies have other property’s that can be used as collateral for loans. Intellectual property, trade marks, etc. can also be used to guarantee a loan as they are usually of great value. A company has many possessions that can be used to guarantee a line of credit or a loan. You’ll just need to consult with credit experts at an agency or financial institution since detailed information on this matter exceeds the purpose of this article.

Loans And Lines Of Credit Based On Future Sells

Finally there are also loans and lines of credit that are based on the future sells of the company. These financial products work as follows: The financial institution processes credit card payments for the company that wants to borrow money and thus, knows exactly the average income of the company in terms of credit card payments. Thus, the financial institution will be able to lend money in the form of a loan or line of credit and agree loan installments or minimum payments that will be withdrawn directly from the amount of money the financial institution gathers from the credit card sells.

Thus, the borrower has a cheap source of funds and the lender obtains guaranteed repayment of the money lent. Moreover, the company doesn’t have to worry about repayment as it is automatically deducted from the sells each month. This financial tool is becoming more and more popular as it provides inexpensive financing, higher loan amounts, fast approval and a very easy and hassle free repayment program.

By: Jess Peterson

About the Author:
Jess Peterson writes finance articles for Yourloanservices.com where she shares her knowledge about how to get money for a starting-up business, consolidating any kind of debt, repairing a home even with a bad credit history and other financial subjects.