Commercial Mortgage Financing

Businesses interested in obtaining commercial mortgage financing can generally find borrowing programs that are geared toward a wide variety of real estate needs. In some ways similar to private mortgages, these funds are used to purchase property that will not be used for residential purposes. In most cases, the borrower will be a business rather than an individual. The kinds of property that might be purchased could include apartment buildings, property to be used for manufacturing or warehouse purposes, or could be used as a retail store or other commercial venture. Qualifying for commercial mortgage financing can be a little more complicated than standard residential lending. This will generally be true because the ability to pay the loan back will depend on a business or partnership's credit worthiness. As a company grows, the need to expand manufacturing space may follow. Storage needs for inventory and equipment may require additional warehouse property. There are special lending programs to address both of these needs. Retailers who are experiencing an increase in sales activity may need to enlarge their current facilities. Funding for this need would be considered commercial lending. Another need that falls in this category is the purchase of office space. Whether a small building or a large office complex is required, specialized loans can supply the needed cash to pull this off.

Since these properties will serve as collateral for the loan, any commercial mortgage financing is considered a secured loan. Secured loans will generally have lower interest rates and easier terms. This is because the risk to the lender is not as high as is the case with unsecured debts. Should a borrower fail to make good on repayment of the debt, the property itself can be repossessed and sold to attempt to recover the balance of the loan. In addition to properties that are purchased for business purposes, machinery, equipment, and other supplies may also be attained using these funds. Start up ventures as well as established businesses can apply for this funding and terms will vary on these loans. Unlike traditional home loans, business financing may require shorter pay off terms. A loan that extends to fifteen years or even shorter is not uncommon. Some loans, particularly those that are used for building business properties, may involve a period of low payments that is followed by a large balloon payment when the building project is complete. Businesses that have a poor credit history can expect to pay higher interests rates if a loan is attainable. Whatever options a business owner might choose commercial mortgage financing can be a valuable tool for growth.

Most companies can find a suitable lending solution among the many commercial mortgage financing options that are available. These programs could include funding for multi family apartment buildings, office or retail space, properties that are suitable for industrial use, assisted living apartments or condos, or even churches. Small balance loans might range from five hundred thousand to one million dollars and could be used for office or retail space or for multi family dwellings. Micro loans might supply funds in the neighborhood of one hundred to five hundred thousand dollars. A category of financing called bridge-hard money will generally be available to the tune of one million dollars or more. The use of these funds might be approved to a borrower who can show both a solid business plan and clearly demonstrated equity. A distressed asset acquisition program is a form of commercial mortgage financing that could help to acquire certain assets for investors or developers. Other types of loans could include funding for hotels or other hospitality industry properties, and church bond and church loan portfolio programs. Building a relationship of trust between the borrower and the lender is important. The Bible describes the relationship between the believer and God as that of a Heavenly Father and His child. "For ye have not received the spirit of bondage again to fear; but ye have received the Spirit of adoption, whereby we cry, Abba, Father." (Romans 8:15)

Some of the common purposes that are listed when an applicant attempts to attain commercial mortgage financing could include acquiring needed land to build on, purchasing an existing building that will be converted to commercial use, or expanding facilities that a company already owns. Before approval on these loans, a lender will need an assurance that the company has sufficient cash flow to make good on monthly payments. In addition, if the company has a poor credit rating, financing may not be a possibility. The personal credit score of the business owner will sometimes be examined as well. Lenders will also compare the value of the company as it currently is with the amount of money that is being sought. Other considerations could include the quality of the business plan and the type of company or venture that is applying.

Construction loans will function a little bit differently from many other examples of commercial mortgage financing. For example, a borrower may only need to pay interest charges while the property is under construction. Once the construction has been completed, the regular payment will kick in. This is because a finished commercial property can generate cash for the owner while a building under construction can not. By supplying the needed funds up front, a lender is enabling a borrower to carry through with a construction project without the added stress of high payments.