A Quick Guide to Commercial Loans


Commercial loans are acquired to fund a pre-planned project. The reasons include building of offices, building a shopping mall, building an apartment, constructing some industrial warehouse among other things. However, both the borrowers and the lenders must have some ground rules that must be met. The loan amount is a core factor to be considered in the agreement between the lender and the borrower. Another very important factor to consider before you write  loan agreement is the interest accrued on the amount borrowed to the principal. Another fundamental to ensure some keen scrutiny before getting into an agreement is the amortization as well as payment flexibility for the borrower.


During underwriting, due diligence is one factor that parties must have. The lender keenly scrutinizes the borrower’s details and extends to scrutinize those of the third party. Commissioning of the third party reports is also a very great factor that influences the lender towards undersigning or refusal to undersign. Commercial loans are mainly held by asset backed trusts, and government sponsored enterprise as well as banks. Be sure to click here and learn more.


Interest accrued to the commercial loans are either floating rates or fixed rates. It is good to note that, commercial loans tend to have interest rates higher than the loans acquired for residential purposes. Lenders put it as a requirement for the borrower to pay an application fee that takes care of the appraisal as well as the underwriting process.


Terms and conditions of commercial loans also vary. Some terms vary between a decade and even half a decade. For an enterprise to be accorded this loan it must be well established with stable cash flows. These types of loans are also called permanent loans. Another type of commercial loan runs from three to five years. This is what Commercial real estate financing is all about.


The bridge loans, another name for shorter period loans, are acquired with the intention of repositioning newly opened property as well as in funding renovations. Some of the commercial loans may run for even thirty years or more. In most cases, only the government sponsored enterprise or government agencies have the mandate and capability of providing such loans.


Privileges of extending the payment deadline may be allowed if the borrower agrees to pay some stipulated extension fee. Once the borrower fails to follow the agreement and exceeds the agreed on time, and then the borrower becomes a defaulter. Learn how to get a loan with bad credit with these steps in http://www.mahalo.com/how-to-get-a-loan-with-bad-credit/.


Commercial loans cannot be acquired without the involvement of amortization agreement. In amortization, the borrower pays both the principal and the interest over time. The borrower is therefore expected to pay a lesser amount at the end of the period due to amortization. Most of the commercial loans end with balloon payment, unlike residential loans. This is so mainly because commercial payment don’t fully amortize at the end of the period. Borrowers may be required to pay some specific amount meant for funding some items at closure. The fee may include tenant improvement fee as well as leasing commission fee.


Expertise by the commercial loans brokers can be used by the borrowing enterprise to save on time.

A Quick Guide to Commercial Loans

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