Commercial Real Estate Loan Difficulties - Business Financing and Investment Options

Overcoming commercial real estate investment property loan problems is increasingly important in the current commercial loan climate. Business borrowers should anticipate several potentially critical difficulties when seeking business financing, and this article will provide an overview of four key business loan issues.

It is not unusual to find that business investment lenders and business loan brokers are not as forward-looking about business financing and investing difficulties as most borrowers would expect, and I have published another article about commercial lenders to bypass. The focus here is on some of the typical commercial loan and SBA loan difficulties often overlooked by commercial lenders and borrowers.

Unanticipated circumstances can lead to unexpected problems with a commercial loan, and borrowers should be ready for these business financing scenarios. There are several critical commercial loan difficulties to be circumvented with business financing. Business loan problems are more serious and prevalent than many borrowers would imagine.

Some of these difficulties might be unavoidable, but in most cases these business financing and SBA loan challenges can be successfully overcome. By being aware of these common commercial loan obstacles, borrowers and their advisors will be properly positioned to take timely and appropriate corrective action.

Commercial Loan and Commercial Real Estate Investment Property Financing Example Number One - Seasoning of ownership and sourcing-seasoning assets.

This commercial mortgage difficulty will not matter to all borrowers. When it does apply, business borrowers should insist on a lender without seasoning and sourcing requirements.

Some commercial lenders will require borrowers to document the source of the down payment for a purchase (sourcing). Commercial lenders will also frequently require that business financing down payment funds be substantiated, most commonly for 1-12 months (seasoning). Seasoning of ownership is based on the minimum time a commercial property must be owned before refinancing can occur.

Avoidable Commercial Mortgage and Business Opportunity Investing Scenario Number Two - Use of secondary business financing.

Many commercial borrowers want the flexibility to use subordinated debt (a seller second or other secondary financing) in order to acquire a commercial property or business opportunity investment with a smaller down payment. Many forms of business investing will not permit a seller second or other forms of subordinated debt. With a commercial loan via non-traditional business lenders, a commercial borrower can use subordinate business financing (including seller seconds) to reduce the amount of their down payment.

Business Loan and Commercial Real Estate Financing Example Number Three - Business financing that needs a long-term commercial loan.

Is long-term investing and financing really possible for a business loan? Some business investment lenders will only offer 5 years before commercial real estate financing will expire with a balloon payment due.

If that sounds like short-term investment business financing instead of long-term, there are business lenders that can arrange 30-year commercial mortgage loans. Longer-term commercial real estate financing will often be the critical difference that facilitates a successful business investment because a new business loan will not be required for many years and commercial loan payments will also be reduced.

Business Financing Example Number Four - Business finance recall terms.

Business loan recall conditions will often allow the commercial lender to force the borrower to repay their loan before the normal loan expiration. This possibility is not relevant to business borrowers if their commercial loan does not contain such recall terms.

Business lenders regularly include recall clauses in their business loan agreements. The provisions which will prompt a recall will vary and typically include annual business lender monitoring of financial statements, tax returns and credit history. Without agreed income, tax returns and credit standards, the lender can choose to require the borrower to pay off the commercial loan within a very short period of time.

Contingency Plans for Business Finance and Commercial Real Estate Loan Recalls - What to do about a commercial loan recall.

When borrowers receive a business financing recall, they must quickly obtain refinancing assistance. When reviewing commercial loan choices for refinancing, borrowers should attempt to exclude potential lenders that require recall terms.

To avoid a potentially disastrous recall scenario, commercial borrowers would be wise to consider only commercial loans which do not have recall terms. For commercial borrowers who have recall provisions in their business financing agreement, it will be equally wise to consider refinancing their business loan or commercial mortgage before a recall occurs so that refinancing is accomplished according to the commercial borrower's timetable.

Copyright 1995-2007 Steve Bush and AEX Commercial Financing Group. All Rights Reserved.

Article Source: http://www.articlesbasecamp.com

Steve Bush is the CEO of AEX Commercial Financing Group and Business Opportunity Loan - Commercial Mortgage Loan Solutions. Steve and AEX Business Finance provide candid business loan and SBA loan advice for commercial real estate investment property loans and business financing throughout the United States.

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