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In response to a volatile residential investing and financing environment in the United States, residential real estate investors are increasingly pursuing commercial mortgage and commercial real estate possibilities. It is essential for business owners, commercial property owners and business investors to be fully-informed in advance about the current SBA loan and business finance environment. There are numerous significant distinctions between commercial real estate investing and residential real estate investing. Of over 20 major commercial loan differences, several important issues will be covered in this business financing article and other commercial financing elements will be described in additional reports. Stated Income Business Loan Options Stated income business loan options will eliminate the need for a borrower to provide personal tax returns. However the stated income business finance approach will not eliminate the need to document income for the business being purchased or refinanced. Unlike residential financing, no documentation (no doc) loans are not available for a commercial mortgage. Down Payment Requirements for a Business Loan Down payment requirements for buying a business commonly vary from 10% to 25% or more. The specific amount will depend on business experience of the borrower, requirements for business opportunity business finance, type of business and credit scores. Commercial Mortgage and Business Opportunity Financing - Size Limitations Commercial property loans and business opportunity financing less than $100,000 are not routinely available. A typical maximum for a stated income commercial mortgage is $2 million. Several common business financing possibilities are limited to a $5 million maximum. Business Finance Interest Rates Interest rates for a business loan are generally higher than residential financing and rates up to 13% and even higher are possible. It is possible to obtain both fixed and variable commercial mortgage interest rates. Business opportunity financing typically has interest rates 1-3% higher than a comparable commercial real estate loan situation. Business Finance and SBA Loan - Personal Guarantors A personal guarantee from all principal owners is usually a standard requirement for business finance situations even when a business is titled under corporate ownership. Because of this, individual credit scores of the business owners will be an important factor to qualify for a business loan. Individuals should expect to personally guarantee a commercial mortgage if they own over 20% of a business. Appraisals for a Commercial Mortgage or Business Opportunity Financing Business finance value is significantly determined by analyzing the income generated by the business rather than the residential appraisal approach of reviewing comparable property values. Business opportunity and commercial property appraisals are much more costly and detailed than residential appraisals and routinely involve about a month to finalize. Other Important Business Loan Differences As noted previously, there are too many differences between residential financing and business finance situations to describe adequately in one article. Some of the critical issues discussed in separate reports are how to avoid common business loan problems, SBA loan financing, balloon and recall provisions for a commercial mortgage, business opportunity financing and special purpose commercial properties. Copyright 1995-2007 AEX Commercial Financing Group and Stephen Bush. All Rights Reserved.
Article Source: http://www.realestateinvestmentarticles.net
About Steve Bush: Stephen provides candid commercial mortgage business loan advice. Free Business Opportunity Financing to Buy a Business reports from AEX Commercial Financing
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