How,Finance,Commercial,Propert DIY How to Finance Commercial Property

Normal 0 false false false MicrosoftInternetExplorer4 /* Style Definitions */ table.MsoNormalTable{mso-style-name:"Table Normal";mso-tstyle-rowband-size:0;mso-tstyle-colband-size:0;mso-style-noshow:yes;mso-style-parent:"";mso-padding-alt:0in When starting a new work at home business it is very easy to become consumed by it. We spend so much time trying to get the business up and running that we may end up becoming burned out and lose our motivation. There is so much to learn and

Financing commercial property is not the same as financingresidential property. Financing residential property is pretty simple andstraightforward. Commercial loans exist in a world of their own. Thesimilarities are that the property must be properly valued, and the propertyowner must be able to repay the loan. Large organizations have the capacity tostructure their debt in ways that are unavailable to the smaller propertyowner. The smaller owner is the focus here.A relationship with a bank will be an enormous asset inacquiring a loan on a prospective commercial site. When economic times aredifficult, your bank will probably throw you under the bus as quickly as onewith which you have no relationship. Under normal circumstances however, alongstanding history with a financial institution should offer the prospectivecommercial property owner some advantages that might not be otherwiseavailable. This would include more personalized service and more attractiverates. Beyond this, the business of banks is to make loans. Shopping for theright bank is essential. Some are hungrier than others. Smaller localinstitutions shouldn’t be discounted. They are more intimately familiar withthe unique aspects of their environment and could offer some advantages inrates and service that larger national institutions may be unwilling orincapable of providing.Items that will be considered are the financial health ofthe prospective owner and the value of the property for which a loan is beingsought. Other factors that will be analyzed relative to the property beingfinanced will be as follows: projected gross income such as rents, operatingexpenses including taxes, maintenance, utilities, insurance premiums and otheritems that are common to the type of property being financed. These factorswill add up to a debt repayment ratio. These ratios vary from one institutionto another. They will also vary with the state of the economy at the time andthe forecast of economic conditions in the near future. If the property ownercannot meet the ratio established by the bank, the likelihood is that the loanwill not be granted.Interest rates on commercial property can be daunting. Therates will probably be substantially higher than residential mortgages. Residentialmortgages are granted subject to a stable work history and an acceptable income.Granting of the commercial loan is tied to the income that the property isprojected to generate. This is a riskier proposition and the property ownerbears the brunt of this risk in higher rates.The term of these loans can be short by comparison toresidential mortgages. Although the payments may be similar to a long-termloan, there could be a balloon payment when the loan matures. The options willthen be to liquidate the property and pay the bank, use company assets to paythe balance, or refinance the commercial property and start anew. Many timesthe refinancing of the loan will require the same level of closing costs thatwere required in securing the loan the first time. This will  include a title search, financial statements,and an examination of the repayment ratio. There are times where an extensionof the existing loan will be offered, but this is not without some costs, suchas appraisal fees, loan generation fees, taxes and a number of other tediousnuisances.Once the prospective commercial property ownerunderstands the character of the commercial loan as opposed to the residentialmortgage, he or she will be enabled to move forward being armed with therequired navigation aids. This will make it much easier to talk intelligentlyto the lending institution and secure the loan. Normal 0 false false false EN-US X-NONE X-NONE /* Style Definitions */ table.MsoNormalTable{mso-style-name:"Table Normal";mso-tstyle-rowband-size:0;mso-tstyle-colband-size:0;mso-style-noshow:yes;mso-style-priority:99;mso-style-qformat:yes;mso-style-parent:"";mso-padding-alt:0in 5.4pt 0in 5.4pt;mso-para-margin-top:0in;mso-para-margin-right:0in;mso-para-margin-bottom:10.0pt;mso-para-margin-left:0in;mso-pagination:widow-orphan;font-size:11.0pt;font-family:"Cambria","serif";mso-ascii-font-family:Cambria;mso-ascii-theme-font:minor-latin;mso-fareast-font-family:"Times New Roman";mso-fareast-theme-font:minor-fareast;mso-hansi-font-family:Cambria;mso-hansi-theme-font:minor-latin;}