Build Cash Flow Statement From Balance Sheet And Income Statement Commercial Mortgage Loans – What Are They?

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Commercial Mortgage Loans – What Are They?

Commercial mortgage loans are executed using real estate to secure the loan. Commercial mortgages are similar to residential mortgages, except that the collateral used to secure the loan is a commercial (business) building rather than a personal residence. If the borrower defaults on the loan, the lender can seize the collateral (the building) to recover the proceeds of the loan.

Commercial mortgage loans are not available to individuals, but to businesses, which include partnerships, incorporated companies, limited liability companies, etc. The business must be financially sound, and the business income verification process can be more complicated than the individual credit check. This is why traditional commercial mortgages can take six to nine months to underwrite.

Commercial loans are obtained for a variety of reasons: to purchase the premises of an existing business, to improve or enlarge an existing premises, for commercial and residential investments or to develop an existing property in other ways. An example would be the purchase of already built business premises, such as offices, shops, restaurants or pubs. In addition, they can also be used to purchase business assets such as plant equipment and specialized machinery.

Interest rates on commercial mortgages are generally higher than those on residential mortgages, but lower than interest rates on unsecured business loans. A fixed rate loan is the most common commercial mortgage. It is similar to a fixed rate mortgage in that the interest rate remains constant throughout the term. However, the term for most commercial mortgage loans is between 3 and 10 years, but can be extended to as much as 25 years.

The amount of a commercial mortgage loan and the interest rate you can get is a direct correlation of creditworthiness as assessed by the lender with regard to your ability to repay the loan. If you have an excellent business record with a verifiable profit and loss statement, then you will have little trouble getting a commercial mortgage at an attractive interest rate.

Commercial loans are not granted without extensive verification of the stability and profitability of your business. A lender will usually want to see your audited financial statements for the last three years, including a profit and loss statement, balance sheet and cash flow forecast. Favorable business information is crucial for the lender and for you because, as discussed earlier, if you default on the loan, the lender can repossess your property and sell it to pay off the remaining mortgage balance.

The best place to find commercial mortgage loans is on the Internet. There are a huge number of commercial lenders competing for your business and they all advertise online. It is possible to compare many loan offers side by side and determine which one is best for your financial situation.

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