Commercial Mortgage Loans - Strategies for Eight Difficult Commercial Financing Situations

The process of getting commercial real mortgages approved is nearly always challenging and sometimes difficult. Business borrowers must be aware that there are many commercial mortgage loan scenarios that are particularly difficult to approve. A selection of eight difficult business loan situations are given to highlight two important factors: (1) these difficulties are not unusual however (2) these challenges are often overcome in most instances.

A Commercial Loan that is Difficult to Get 1.

The commercial loans that must be completed within the 60-day period at the most. It is not uncommon to find that traditional lenders consider the period of six-to 9 months "normal" for commercial loan underwriting. This is obviously an extreme restriction when a commercial lender is looking to purchase a property that the seller wishes to close in between two and three months. If urgent funding is needed and the commercial lender needs to seek out a non-bank business lender which will typically close within between 45 and 55 days.

Complex Commercial Mortgage Situation 2.

The term "commercial loan" refers to a commercial credit that isn't viable in the absence of long-term financial. What is long-term financing for commercial loans? Certain commercial lenders see 3 to 5 years as the lengthiest time before a commercial loan is subject to an unintentional balloon payment. If this sounds like a short-term option rather than long-term, the majority of businesses that are not banks can offer 25-year-to-40-year commercial loans to commercial properties. The longer-term financing is often the key element that makes the success of a business investment (especially since mortgage payments will decrease drastically).

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Complex Commercial Mortgage Situation 3.

Giving financial information for a commercial lending institution following the loan has been completed. Some commercial loans are governed by covenants that state that the lender will be able to access financial information even after the loan's closing date as well as that the loan could be taken back (forcing an applicant to pay back in advance) in the event that an audit of the information does not meet the requirements of the lender. Contrary to the above, commercial loans from commercial lenders that are not banks based on Stated Income do not require the submission of business plan or verification of income prior to or after the loan has been closed.

Commercial Mortgage Loan that is difficult Situation 4.

The borrower is self-employed or earns income via a commission, bonus or incentive basis which is not consistent and is difficult to properly document. Non-bank commercial lenders who use a Stated Income business loan program won't require tax returns , or any income verification. They will also not require commercial customers for signatures on IRS form 4506 (which permits the lender to get the tax return directly from IRS) which is a form that is commonly required by commercial lenders.

Commercial Mortgage Loan with a Difficulty Situation 5:

A borrower is looking to refinance commercial property and utilize the $500,000-$1 million of the funds to purchase another house. Most commercial lenders limit the amount of amount of cash that they can take in a refinancing which is typically $100 to $250,000. It's not uncommon to come across restrictions regarding the usage of cash. When a commercial loan is made through many non-bank commercial lenders commercial lenders can get unrestricted cash for up to one million dollars , and make use of the funds without restriction.

A difficult Commercial Mortgage Situation 6.

A borrower would like to take advantage of a significant quantity of subordinated credit (a Seller Second or any other additional financing) to decrease the amount of money needed to buy a commercial property. Many commercial loans don't allow sellers second loans or other types of subordinated debt. With a commercial loan via most non-bank business lenders, a commercial borrower can obtain Combined-Loan-to-Value (CLTV) ratios up to 95% with subordinate financing (including seller seconds).

Complex Commercial Mortgage Situation 7:

Sourcing and seasoning of ownership or assets. For a purchase commercial lender, they will typically require proof of the source of the down payment getting its money from (the source, therefore having restrictions on the place where the money is coming from is referred to as"sourcing"). Commercial lenders often have conditions that require that the down payment money must be in a particular account for a specified amount of time, typically three months or more (this is known as seasoning since it's equivalent to having to prove that the money has maturated by being in the same location for a period of time). The process of seasoning ownership can be comparable to the seasoning of funds however, this is a requirement that relates to the minimum amount of time that someone has owned commercial property before being able to finance the home. The majority of non-bank commercial lenders don't have any restrictions or restrictions on either sourcing or seasoning funds, or the seasoning of ownership.

A difficult Commercial Mortgage Situation 8.

A borrower is required to take out commercial loans of $100,000. What's difficult about this scenario? Most commercial lenders have higher minimums to lend commercially ($250,000 to $350,000 isn't unusual). In the majority of non-bank business lenders the minimum commercial loan is $100,000.