Business Finance and Business Opportunity Loan - Essential Facts

Business finance for commercial real estate and businesses varies from residential financing in more than 25 different and critical ways. It is clear that residential real estate investors are evaluating business financing and commercial real estate opportunities. This commercial mortgage and business opportunity financing report should be helpful to new commercial investors in educating them about important commercial loan and commercial real estate loan factors.

SBA Loan Financing

Small Business Administration loan programs are an important consideration in many business financing and commercial mortgage situations. There are also problems and limitations with SBA business loan programs that should not be overlooked. While all business borrowers will not qualify for these business finance approaches, it is probable that many borrowers will benefit from inclusion of SBA loan financing.

Business Opportunity Business Loan Options

Business opportunity financing is unique and complex because it involves the financing of a business without real estate. Due to the absence of real estate, traditional commercial mortgage financing is not possible. The number of potential lenders will be greatly reduced, and key terms such as length of loan and down payments will be significantly different compared to a business loan involving commercial real estate as collateral.

Balloon Payment Requirements for a Business Loan

Some commercial lenders will use balloon payments as a substitute for a true long-term commercial mortgage. With balloon payment terms, a commercial borrower will be faced with a large lump-sum payment that is due after a typical period of three to ten years. At that time, if borrowers are unable to afford such a large payment, they will be forced to either sell their business or refinance their business loan or business opportunity loan.

Length of a Business Loan

It is very common for traditional banks to limit their commercial mortgage and business loan terms to a period as short as three to five years. Longer-term business finance terms are available but only from a relatively small number of commercial lenders. Some specialized situations such as business opportunity financing are typically limited to ten years or less due to the lack of commercial real estate as collateral.

Recall Provisions for a Commercial Mortgage Business Loan

A recall clause is one of the least desirable business finance terms offered by a business lender. If a business loan agreement includes such terms, a lender is permitted to require early repayment of the commercial mortgage under specified conditions. The terms which can cause the lender to call the commercial loan will vary but will commonly include periodic lender review of financial statements, tax returns and credit history.

Business Loan Lenders - Think Outside the Bank

The best commercial lenders for commercial mortgage and business opportunity financing are not likely to be local or regional banks. In general traditional banks are seeking a smaller role in business financing and are especially limited in their ability to handle specialized business finance situations. Because most business loan situations are more complex than residential financing, a prudent commercial borrower should search for lenders specializing in commercial financing.

More Commercial Mortgage Features

Residential financing is significantly different from the business loan environment in the United States. Some critical differences not included in this article will be described in separate commercial mortgage reports. Additional topics include business finance lockout penalty fees, refinancing an SBA loan, business appraisals and stated income commercial financing.

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Business Finance and Business Opportunity Loan - Essential Facts

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