Commercial Finance – How to overcome the challenges
Posted on | April 24, 2012 | No Comments
One of the biggest challenges that a prospective businessman or a commercial developer faces in today’s world is; getting a commercial finance for his business. Mortgage lenders are stricter with lending their money than ever before. To tell you the truth; that’s not surprising at all, considering the recession is all time high and nobody wants to lose their money. This is true not only in case of small businessmen who need commercial finance to build their establishments, but it also holds true for the businessmen who are into commercial developments. It becomes increasingly hard for them to find financing services to fund the constructions of office buildings or residential apartments. That’s why, a prospective businessman, always places a proper strategy, when he is really serious about getting the commercial finance. Let’s have a look at the various aspects of the commercial businesses that one can improve upon. So that he would be able to get the finance effortlessly and without any glitch.
Quality: Quality is what matters most in these times and there is no place for mediocrity. There is only one way of survival in these hard times, and that is quality. If you can come up with the highest quality of products with reasonable prices only then you can think of running a business successfully. Commercial businessmen and builders should have a rock solid action plan of the highest quality, if they are expecting to get the commercial finance. What money lenders want is some sort of surety that their money is safe. For instance; if there is a commercial developer who has already leased 60% of the residential flats or commercial units then he makes an ideal candidate for getting the commercial finance.
Location: There is a popular saying that goes like; for a business to be successful, there are three things that matters the most; location, location and location. To a large extent, location is something that decides how you fare in the business. Therefore one should never compromise in selecting the best location for his business. You may have to pay a little extra for the ideal location for your business; however, you are very likely to recover the amount in the very first year itself. Besides, it’s always easy to receive finances from the lenders on the basis of location. The lenders are more likely to give you finance if your business establishment situated in the desirable location. For instance; if a commercial builder needs finance for one of his projects which is a residential complex situated near a college or a business center, his commercial finance application has very high chances of approval.
Tenants’ types: You may not have given it the slightest of thought, but money lenders also look at the type of tenants in your residential complex. Yes that’s hard to believe, but it’s completely true. You can blame the hard times or whatever you want; but you cannot take away the fact that the money lenders are extra careful in lending their money these days. So what types of tenants are the ideal tenants? On the very top of ideal tenants list is the doctors and other medical service providers. Medical is a profession that will remain as a thriving profession, no matter where the economy goes. If the commercial unit houses a good number of grocery stores then that would also place you in a good position for getting the commercial finance approval.
Last but not the least is the commercial developer itself. If the developer owns a big firm and has made a name in the business of commercial developments, he is more likely to get the approval for the commercial finance.
Commercial Mortgages made easy!
Posted on | April 5, 2012 | No Comments
Commercial mortgages and residential mortgages are very alike, however in terms of commercial, the collateral is either a trade real estate or commercial building instead of a residential premises and the borrower will commonly be a business, not an individual person.
Commercial mortgages are extremely popular for companies wishing to purchase both buildings and land for business functions and although the lender possesses the legal rights over the property until the mortgage is paid off, the loan allows borrowers an excellent platform to kick off a business opportunity or develop existing space.
Businesses that apply for a commercial mortgage usually do so because they are either starting-up, intend to expand or wish to buy their own office premises. This type of mortgage loan is perfect for helping businesses escape constraining lease agreements whilst also allowing borrowers to invest in a location more appropriate to specific budgets as well as the overall business requirements.
The benefits of commercial mortgages are extensive, including providing businesses with a huge capital gain asset which can typically increase in value. Some investors require part-ownership of the business whereas having a commercial mortgage allows the company to maintain complete ownership. This type of loan provides stability because it is not subject to the inconsistencies which effect residential properties and offers a lower interest rate as well as lower monthly outgoings than most other loans or overdrafts; this allows the business to predict future financing with increased accuracy. Commercial mortgage interest payments are also tax deductible which can help to decrease the annual tax expenses as well as offering the opportunity to sub-let any unused business space.
However, where there are advantages to commercial mortgages, there are also disadvantages that business owners should be aware of. The deposit required could be hefty and you could spend money that would be potentially vital in other areas of your business plan. The lender may require additional guarantees if the company credit rating has a bad history and the loaner could insist on an agreement of some asset to secure the loan. As well as this, there could be hidden defaults in the contract which the borrower should be aware of and negotiate in advance.
On top of this, a business looking to apply for a commercial mortgage loan should be aware of the massive commitment as most contracts are valid for between 10 to 30 years. During this time, any failure to make payments or fund further interest rates could result in the property being repossessed.
To apply for a commercial mortgage loan you can either contact your bank or seek a reputable private lender. Before you do so, it is highly recommended that you have already located a property that you are interested in, you have a good credit history and you can prove your financial stability with a strong business plan.