At it’s very core, a commercial loan is a business arrangement that is used to fund major purchases or improvements, typically in the real estate sector. Commercial lending specializes in large project that businesses or individuals could not afford to handle financially on their own.
While there are a variety reasons for a borrower to seek out funding through commercial lending, they all have one thing in common. These loans exist to help businesses, whether in real estate or any other field, bridge the gap between operational expenses and increased profit potential. Many small business owners have effectively used this source of funding to leverage their businesses into another level of productivity and profit.
There is a certain level of risk that is associated with commercial lending, on behalf of both the lender and the borrower. With the loan amounts being very large, there is always the potential for some sort of unforeseen circumstance to scramble the best laid plans of even the most qualified lenders. There are many factors that might have an impact on the success of a commercial venture, especially in real estate. Natural disasters, the overall state of the economy and political fallout are all large influences in the success of businesses and all of them are outside of the control of either the borrower or the lender. However, there are ways to minimize the risk so that both lenders and borrowers can steer clear of catastrophe.
Obtaining a loan through commercial lending can be a very time consuming and extensive process. This is very much on purpose, on behalf of the lenders. After all, they are going to be giving the borrower a substantial amount of money and they will need to make sure that their investment is a good one. For traditional loans, the creditworthiness of the borrower is critical. This will immediately let lenders know whether or not the borrower is a risk. If the borrower is determined to be a risk, this does not necessarily mean that they will not be able to obtain funding, but if they do, it will be at a higher interest rate and will most likely have additional requirements. In addition to this, the business that is applying for the funding will have to provide a substantial amount of financial documentation to establish the health of the business. This will most likely include balance sheets, bank statements and tax returns. Depending on the lender, the primary business owner might also have to provide this information about their personal finances.
Are borrowers able to obtain loans through commercial lending multiple times?
Each loan is considered a separate process and procedure, so it is likely that a small business will consistently have a loan floating on their books. However, each loan takes into account the borrowers credit, so multiple inquiries have the potential to hinder further efforts. It is also possible for borrower to renew their loan. Depending on the commercial lending agency, the borrower may be able to roll their loan into a new option for financing. Usually this will offer better interest rates and terms, as the borrower will have established themselves as a lower risk with the lending institution. Assuming, of course, that the borrower responsibly handled the first loan.
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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