COMMERCIAL MORTGAGE ADVICE

When you do a close comparison of available residential and commercial mortgages, you will notice that with commercial real estate property the financial organization is concerned with whether the business is sound and can be profitable in the future.

For instance, you may have a company which is not very successful and has average credit history but you can still buy a commercial property. What the bank would consider is how much profit you are earning against the sum of debt that you have got. If they feel that the business would not qualify for the mortgage they may require to see your personal credit account or demand some sort of a deposit but generally you can get the loan - at least in the good old days before the recession.

A few things to consider before applying:

If your party runs out of cash to repay the mortgage, the real estate, as the security (collateral), will be taken over, if you cannot negotiate you way to a solution.
Normally the mortgage is defined even if the property fails to bear the entire amount of the loan then the borrower will still have to make the remaining payment. This depends on the details of the loan.
Companies use this kind of loan to get an increased level of real estate by projecting profits, which is high risk as profits may not materialise at the required rate.
This can lead to a company expanding too fast, leading a healthy company to collapse due to cash flow problems.

Who is eligible:

The party applying for the commercial mortgage will have to fulfill the eligibility standards to get a good loan.

Foremost, there is an immediate payment ratio which has to be worked out. Additionally, the company has to have a really fine credit account (especially nowadays).

Above: Commercial buildings - and also an arts centre - state culture building

Having a bad credit history won't help you get a good loan. If you can get anything at all, it will have higher interest rates and a larger deposit.

The financial institution which is providing the loan will also assure if the business is stable. It also has to have up-to-date accounts for several years back. The bank could ask to see the fiscal accounts and also the financial bearings and goals that the company works with (the 'mission' or business plan).

Fundamentally the bank has to be positive about the information to be sure that your organization can pay the loan. There are some types of businesses that a bank will not give loan to, and specialised mortgage lenders are required (maritime for instance). This area is quite complicated and requires professional assistance. Whenever your organization is thinking of commercial mortgage you have to find a financial adviser to brief you thoroughly.