Several Questions About Commercial Property Financing

Depending on the nature of your business, it may eventually become necessary to invest in buying real estate. While it is common for commercial entities to engage in real estate transactions, there are many individuals that will have questions that they want answered when they are going through their first commercial real estate transaction.

How Will A New Company Be Evaluated For Commercial Property Financing?

As part of the application process, the lender will want to review the credit history and financial status of the business. However, there will be instances where the business may be too new to have an established credit history. In these instances, the lender will likely require that the owner or principal investors provide this information and secure the commercial property financing.

What Factors Should You Consider Before Accepting Financing Terms?

There are many different types of loans that your business can obtain to finance real estate transactions. Prior to accepting a particular loan offer, you should closely review the terms that it is proposing. In some instances, a loan may have lower monthly payments due to there being a large balloon payment at the end of the loan. Additionally, some loans may have adjustable interest rates, which can lead to higher than expected payments in the future. While choosing a loan with the lowest monthly payments can be important, predictability can be another important factor. While a loan with a set repayment rate may have slightly higher costs, the benefits of having a predictable payment can be a valuable benefit.

What Happens If Your Company Falls Behind On Its Loan Payments?

Unfortunately, there can be instances where your company may experience a financial shortfall. This can lead to falling behind on loan payments. While most lenders will work with borrowers to help make payment as easy as possible, lenders can be forced to take aggressive action, such as foreclosure, to recover the loan. Due to the sizable problems that this can cause for your company, you should take aggressive steps to avoid this outcome. For example, it can be worthwhile to keep several months' worth of loan payments in reserve. This can help to offset many temporary shortfalls. In situations where you will have no choice but to fall behind on your payments, you should contact the lender as soon as possible. Many will be able to offer temporary assistance. Also, lenders may be less likely to take aggressive collection action if your business is actively working with them to get caught up on payments.

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