Critical Real Estate Mortgage and Business Loan Finance Facts

Because investors are increasingly considering business opportunities and commercial property, it is important to their success that they receive a comprehensive introduction to the distinctions between residential real estate financing and commercial real estate - business opportunity investing. This business loan discussion will inform new business real estate investors about critical business financing factors.

SBA Loan Refinance and Business Finance Issues

Refinance requirements for business opportunity financing and a commercial real estate loan will usually be more difficult than the commercial loan for initial purchase. This is particularly evident with SBA loan refinancing. It is important to explore these likely refinancing problems before proceeding with any commercial real estate financing or business loan.

Commercial Real Estate Finance and Business Loan Difficulties

Compared to residential real estate property loans, a business loan has more potential obstacles. This impacts the complexity and time required to finalize most commercial real estate financing and commercial financing situations. Problematic commercial loan factors that recur frequently should be a matter of particular concern.

Enhanced Value of Business Loan Experience

There are unfortunately many inexperienced or ineffective business loan advisors and lenders. This is due in large part to the poor current state of residential real estate lending, and a lack of meaningful experience can result in irreparable harm to the loan process. A significant number of residential mortgage brokers are attempting to replace residential loan activity with commercial mortgage business, but in doing so they are acting as commercial loan advisors with little or no actual business financing expertise.

Time to Finalize a Business Opportunity Loan or Commercial Mortgage

Regional and local banks will frequently have an extensive business loan process that can consume nine months or more. Non-traditional business finance requirements can be completed more efficiently than with a traditional commercial lender but the process will still be several longer than a typical residential real estate loan. The use of SBA loan and specialized commercial mortgage programs can increase the complexity and time frame for completion of business financing.

Commercial Real Estate Mortgage and Business Finance Fees

Because the business loan process is more complex and lengthy than residential real estate financing, a different fee structure should be expected. Initial commercial mortgage retainer fees are more commonplace than with a residential mortgage financing process. The business finance loan structure is characterized by several third-party costs such as appraisal and environmental requirements that contribute to substantial costs beyond the direct commercial lender fees.

Commercial Real Estate Loan for Special Purpose Property Situations

Special purpose commercial real estate finance situations involving funeral homes, golf courses, churches, gas stations and similar specialized properties result in complexities not seen with residential mortgage financing. Such specialized commercial properties are increasingly excluded from the business loan portfolios of many commercial lenders. Because of limited lending options combined with unique commercial mortgage issues, golf course financing, church financing and funeral home financing are among the most difficult scenarios for business financing.

More Key Real Estate Mortgage Factors

The business finance and commercial real estate loan process throughout the U.S. has many factors differentiating it from residential mortgage finance. A number of additional relevant aspects are included in separate business loan reports. A few of the subjects included in other reports are business opportunity loans, SBA loan finance, personal guarantors and lender suitability criteria.