Business Financing Challenges - Commercial Loan Solutions

It is not unusual to find that business lenders and business loan brokers are not as forward-looking about commercial financing difficulties as most borrowers would expect, and I have published another article about commercial lenders to bypass. The focus here is on some of the typical commercial loan difficulties often overlooked by commercial lenders and borrowers.

Unexpected business financing possibilities can result in severe complications with a business loan, and business borrowers should be prepared for these commercial financing circumstances. There are many potential business loan obstacles to be evaded with commercial financing. Business financing problems with a typical commercial loan are more numerous and serious than most business borrowers would think.

Some of these difficulties might be unavoidable, but in most cases these business financing challenges can be successfully overcome. By being aware of these common commercial loan obstacles, borrowers and their advisors will be properly positioned to take timely and appropriate corrective action.

(1) Difficult Business Financing Situation Number 1: Sourcing/seasoning assets and seasoning of ownership. This particular commercial loan problem will not be relevant to all business borrowers. However, if it is relevant, commercial borrowers should seek out a lender without sourcing and seasoning requirements or limitations.

For a purchase, some commercial lenders will want documentation about where the down payment is coming from (sourcing). Many commercial lenders will also require business borrowers to document commercial loan down payment funds over several months (seasoning). Seasoning of ownership involves the minimum time someone has owned a commercial property before they can refinance.

(2) Proactive Commercial Loan Example Number 2: A borrower wants to use a seller second or other secondary financing to decrease the down payment required to buy a business property.

Many commercial loan programs will not permit a seller second. With business financing through less restrictive commercial lenders, a borrower will be able to employ a seller second and reduce their down payment needs.

(3) Avoidable Commercial Mortgage Scenario Number 3: A business loan scenario that requires long-term business financing. How long is a long-term commercial loan? Business lenders often consider 3 years as the maximum period before a balloon payment will be due for a commercial mortgage.

If you think that describes short-term commercial loan terms rather than long-term, you will be pleased to discover the lenders that will provide 30-year business financing. A long-term business loan will frequently be the factor that creates a successful commercial investment scenario because a new commercial mortgage will not be needed for many years and monthly payments will be substantially decreased.

(4) Avoidable Commercial Mortgage Scenario Number 4: Business loan recall provisions. Commercial loan recall covenants mean that the business lender can force the borrower to repay early by calling the loan before it would normally expire. This potential concern is not applicable to all borrowers since some business financing agreements will not allow a loan recall possibility.

Traditional lenders frequently put recall clauses in their business financing provisions. The conditions which can trigger recalls differ and include regular evaluation of credit history and financials by the commercial lender. If required levels of credit standards and income cannot be confirmed, the lender will enforce the recall provisions by requiring an early and immediate payoff of the business loan.

Contingency Plans for Business Loan Recalls: When borrowers receive a business financing recall, they must quickly obtain refinancing assistance. When reviewing commercial loan choices for refinancing, borrowers should exclude potential lenders that require recall terms.

To avoid this undesirable recall possibility, commercial borrowers would be wise to include only business financing without recall terms. For borrowers with recall terms in their current commercial loan, it will be equally wise to consider commercial mortgage refinancing prior to an unanticipated recall.

Copyright 2005-2007 AEX Commercial Financing Group, LLC. All Rights Reserved.

By: Stephen A. Bush

Article Directory: http://www.articledashboard.com

About Steve Bush: Stephen provides candid commercial mortgage loan advice. Sign up for free AEX Credit Card Processing reports
This and other unique content commercial loan articles are available with free reprint rights.