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Launch or Expand Your Business Faster with a Commercial Mortgage Loan
Also Receive No Obligation Quotes from 5 Vendors
Also Receive No Obligation Quotes from up to 5 Vendors

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By: Arlette Measures
Get Our Free Guide to Commercial Mortgage Lending

If you need to acquire land or commercial property for your business, refinance existing business debt, or expand your existing facilities, you might consider applying for a commercial mortgage loan. Commercial mortgage lenders provide funding to businesses and other organizations for the purchase of property. A commercial mortgage lender acts in much the same capacity as a mortgage lender for a private individual.

Key Benefits of Commercial Loan Services
Commercial loan services facilitate business growth by providing much needed funding. This can be a major challenge, especially for small businesses. As National Small Business Association (NSBA) President and CEO Todd McCracken recently noted, “Financing shortages and cash-flow problems have forced 20 percent of small-business respondents to reduce employee benefits, and 17 percent were unable to increase inventory to meet demand.”

Many commercial lenders alleviate this problem by offering affordable rates to businesses. Commercial mortgage loans allow businesses to purchase office space, warehouse space, production space, and more.
Along with the mortgage itself, many businesses rely on their commercial mortgage lenders for additional funding so they can increase the size of their office space. This additional funding is built into the mortgage itself so that businesses can make improvements without having to pay up-front costs.

Potential Drawbacks
Truth in lending does not require lenders to disclose individual fees; all fees can be lumped together. The only real requirement is to calculate and show a true APR, which would include all fees. Be sure to ask questions try to get everything in writing. Read your loan documents carefully prior to signing; you might even consider having an attorney review them.

Not all of the laws that apply to residential real estate transactions will apply to commercial and non owner occupied loans, so do your research carefully. Be aware of fees such as “origination” charges that may occur with a commercial loan. For example, a transaction that was originated with one company may then be referred to another company who then refers it to the actual lender who will fund the loan. All of the parties involved will then assess a fee, and may try to put a demand in escrow to be paid some percentage or flat fee. The best way to avoid this is to go directly to a reputable lender.

Important Facts about Commercial Mortgage Loans
A commercial mortgage is comparable to a residential mortgage, except the collateral is a commercial structure or other business property, rather than a residential property. The borrower may be a partnership, incorporated business, or limited company, so assessment of the creditworthiness of the business can be more complicated than is the case with residential mortgages.

Some commercial mortgages are nonrecourse; if the borrower should fail to make payments, the creditor can seize only the collateral. There can be no additional claims made against the borrower for any residual debt.

The terms of a commercial mortgage loan typically allow the borrower to obtain a release of a lien if certain conditions are satisfied. In a limited number of cases, the borrower may obtain the release of a lien at will. More often, a lien release is conditioned on a requirement that the borrower pay down the principal on the loan by a prescribed amount.

If the mortgage loan is secured by multiple properties, the terms of the obligation may provide that certain properties may be sold and the sale proceeds applied to pay down the loan. In general, the payment required must be no less than the net proceeds from a sale of the property or no less than an amount that is calculated by a predetermined formula.

In addition, the terms of the obligation may provide that, in the event of a casualty loss or a condemnation of all or a portion of the property, the borrower may obtain the release of the affected property if it applies the insurance proceeds or the condemnation award to pay down the loan.

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