Commercial loans are a great way to help to grow your business but there are a few facts that you need to be sure to understand. Knowing exactly what it will cost you to borrow money is an important factor in deciding if you are making a wise business decision.
Whenever you are considering commercial loans, there are a few factors that you need to take into consideration. It can be very easy to research the process of applying for the loan and all of the requirements so that you have a good knowledge base. But then as you slog through the application process, it can become very stressful. You are supplying years of data and financial information simply to prove your creditworthiness and the character of the business. And the longer you wait the more you begin to worry that you will not get approved. So when the approval does finally come through, you are tempted to quickly sign the documents to get the loan. But you need to carefully evaluate the entire offer and terms.
Knowing if you are being offered a fixed rate loan or a variable rate is important for your future financial planning. The fixed rate will offer you a stable and consistent payment for the life of the loan. A variable rate loan will fluctuate as the market changes and can be very difficult to work into your budget if you have limited funds. The variable rate does offer the potential to save on your interest rate if the rate drops but it also hold the potential for an increase in your costs if the rate goes up. You need to understand and accept the potential risk if you are opting for a variable interest rate.
You also need to look very closely at the interest rate that you are going to be paying. Is it at or near the average rate that you were expecting? If there is a discrepancy then you need to speak to the lender to learn why. The rate should be determined based on the business’s current financial condition and stability as well as cash reserves and equity in other property or equipment. A rate change of even one or two points can be a large sum of money over the course of your loan.
Understanding the Fees
There are many fees that you might need to prepay on commercial loans. This can include a loan origination fee or a processing fee, legal fees to cover the contract creating by the lender and also fees for surveys and appraisals of any property involved in the loan. The most important part of this is that these fees in no way guarantee that you will be getting a loan. So you need to be willing to pay the administrative fees even before you submit your documentation.
Be Prepared
The best way to insure that you are not wasting any money is to be prepared. You need to understand the fee structure and also the requirements to qualify for the loan. Once you know that you will qualify then you can move forward feeling secure about your financial position and your ability to get the commercial loan that you are requesting.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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