Do you need money to secure a place for your work? Perhaps it’s just some office space. Maybe your business relies on a whole host of properties, like apartments, to make money through rents in the first place. These are just two of many examples of reasons businesses need commercial mortgages. It’s important to understand what this form of financing involves.
Commercial Loan vs. Commercial Mortgage
In these situations, chances are that what you’re looking for is actually a commercial loan. This is money a lender will loan to you so you can pay for the property you desire. The commercial mortgage is what is used to secure this loan by putting the property in as collateral. The mortgage is what will outline and determine the consequences if you don’t hold up your side of the deal. However, these two terms are generally used interchangeably.
Qualifying for a Commercial Mortgage
When it comes to buying a home, you (the borrower) are the most important factor in securing financing. The bank will want to know how much you make, your credit history, current debts, etc. Of course, they’ll also want to learn about the home you’re purchasing too.
It’s a bit different when it comes to a commercial mortgage though. With these loans, the property will take the centre stage. The bank is interested in knowing if this property will actually help your business make money. In this way, it’s a lot like how banks would look at your income for a home mortgage. If your company buys a car wash, the bank wants to see if that car wash will actually be successful and help you bring in the money necessary to repay them.
However, the bank is also going to be curious about whether or not the property can turn a profit for them. Should the mortgage be broken, the management at the bank might decide to take that car wash over. At the very least, they’ll want to sell it to help recoup their investment.
The main ratio a bank uses to establish if you’re worth their money is taking the profit your business pulls every year divided by the amount you’ll have to pay them in monthly instalments (including interest). As long as this amount is covered, you should be good.
What If I Can’t Qualify?
If for some reason you can’t quality for the commercial mortgage you need, whether it’s because of your business’ credit or the property you’re interested in, you still have some options. There’s practically always someone out there willing to provide financing at terms that might sound rather exorbitant. So if a bank turns you down, look for commercial property investors. Many times banks just sell the mortgage to them anyway, so if you can find one, you might actually end up saving some money.
Commercial mortgages aren’t so mysterious and can be very easy to secure if you know what you’re doing. Remember that there are plenty of lenders out there if the first one says “No”.
About the Author: Dominic Lambrinos
Dominic Lambrinos is a financial expert who provides professional business finance solutions, commercial financial engineering, expert review of financial submissions, negotiation, equity raising, business sales, and trade financing. Dominic is also a sought after finance business trainer, and accomplished public speaker.
Under Dominic’s guidance , his team can also prepare professional financial submissions, review financial statements, provide financial accounting, business administration, development of information systems, marketing and sales skills, computer and Internet sales skills.