What to Expect When Applying for a Commercial Mortgage Loan
Getting a loan for your business can be exciting because you will have the funds to improve your existing business or perhaps purchase a new property for expansion. The downside is that the commercial loan process is significantly different from a residential loan familiar to most business owners. Many lenders will carefully scrutinize the borrower, delving deeply into their finances and the workings of the business. It can be intrusive and upsetting to the business owner. Shop Commercial Mortgage works a bit differently, and we will discuss that in a bit.
First, let’s look at the requirements of a conventional commercial loan:
Paying Back the Loan — If a balloon payment is due, it may be difficult for the business owner to save enough to pay it. This can result in refinancing the original loan. This can be difficult if the business has had cash flow problems or there has been a downturn in the business climate. The business owner can risk being turned down for a new loan or refinancing, which puts their business at risk.
How Much Do I Need? — A business owner needs to carefully evaluate how much money they need to support their business, but not borrow excess funds because of speculation. Commercial loans are considered riskier than home loans, therefore interest rates are higher and borrowed money needs to be put to use. In addition, conventional lenders often want the borrower to supply 25% or more in down payment, creating an even more financial burden for the borrower.
How Long Will It Take? — Getting a business loan from conventional lenders can take several weeks because the lender will go through multiple steps before issuing a loan commitment letter. See below how Shop Commercial Mortgage can solve that problem for you.
What Covenants and Conditions Mean — Covenants or conditions are specified in the loan document, and basically are requirements you must meet beyond paying back the loan. Lenders can require you to give them regular income statements, balance sheets, or tax returns during the life of the loan. They might require you prove regular positive cash flow or almost any other financial requirement they can devise. If you don’t meet these conditions, they can consider your loan in default, resulting in penalties or a demand to immediately repay the loan.
Documentation and Hidden Fees — With conventional lenders, owners must be prepared to supply 3-5 years of financial statements, leases, original corporate documents, and personal financial records. Owners also need to be aware of the total cost of the loan, including legal fees, surveys, application fees, appraisals, and other charges either pre-paid or applied to the loan. These can result in thousands of dollars in extra cost.
Here is how Shop Commercial Mortgage can help
Our commercial loans use the equity in existing commercial properties to secure the loan. We require no upfront fees; you will pay for the appraisal and commercial insurance. We don’t require due diligence or charge for our qualification visit. We offer commitment in as little as 72 hours, with financing often available in as little as seven days! Our documentation needs are simplified; proof of equity, bank statements, rent or lease documentation. We offer loans from $50K to $10M, with terms from 1-7 years.
If you are tired of the complexity and delays from conventional commercial lenders, contact Shop Commercial Mortgage and let us simplify your commercial loan.