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Business Loan and Business Finance - What You Need to Know

Business finance for commercial real estate and businesses varies from residential financing in more than 25 different and critical ways. It is clear that residential real estate investors are evaluating business financing and commercial real estate opportunities. This commercial mortgage and business opportunity financing report should be helpful to new commercial investors in educating them about important commercial loan and commercial real estate loan factors.

SBA Loan Financing

The availability of SBA loan programs is an important and useful aspect of many business financing strategies. There are also critical limitations and potential problems with Small Business Administration business finance programs. Some commercial borrowers will benefit significantly from SBA loan financing, and it is equally likely that many business borrowers will either not qualify or should avoid such business loan programs.

Business Loan Choices for Business Opportunity Financing

Because it involves the financing of a business without real estate, a business opportunity business loan can be difficult to arrange. Traditional business finance approaches are not workable. Several terms such as down payment requirements will be different in comparison to a commercial mortgage with commercial property as collateral and there will be fewer qualified lenders.

Balloon Payment Requirements for a Business Loan

Some commercial lenders will use balloon payments as a substitute for a true long-term commercial mortgage. With balloon payment terms, a commercial borrower will be faced with a large lump-sum payment that is due after a typical period of three to ten years. At that time, if borrowers are unable to afford such a large payment, they will be forced to either sell their business or refinance their business loan or business opportunity loan.

Length of a Business Loan

It is very common for traditional banks to limit their commercial mortgage and business loan terms to a period as short as three to five years. Longer-term business finance terms are available but only from a relatively small number of commercial lenders. Some specialized situations such as business opportunity financing are typically limited to ten years or less due to the lack of commercial real estate as collateral.

Business Finance Recall Terms

From the perspective of a business owner, one of the most undesirable business loan terms is a recall clause allowing the lender to call the loan early. A lender can require early repayment of the commercial loan under defined conditions when a business financing agreement includes recall terms. The conditions which allow the lender to call the commercial mortgage often include periodic review of financial statements, credit history and tax returns.

Thinking Outside the Bank for Commercial Mortgage Lenders

Local and regional banks are not likely to be the best commercial lenders for business opportunity loans and commercial mortgage loans. Traditional banks have recently served a reduced role in most business finance circumstances and are even more restricted in successfully working with specialized business financing situations. Almost all commercial loan scenarios are more difficult than residential financing. A practical commercial borrower should insist on lenders established as business finance specialists.

Other Critical Business Loan Factors

Commercial mortgage requirements are very different from residential financing requirements in the United States. Additional business finance reports include a discussion of many other significant financing factors. Separate report topics include SBA loan refinancing, stated income business loans, business financing lockout penalty fees and commercial appraisals.

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