Commercial Real Estate Financing Trap

Securing Commercial Real Estate Financing can be tricky, you have a project to be developed but you need the financing to go forward. Most banks are skittish about investing in the Commercial Market these days, but for obvious reasons that seems like the most logical option, right? Not necessarily, banks have not been the major lenders in the Commercial Real Estate Financing game, even prior to the economic downturn. Yet, where does one turn for Commercial Real Estate Financing?

There are a large number of companies many of which you would never consider major players in Commercial Real Estate Financing. But where does one find who these companies are? You can make the gamble and present your project to numerous companies and firms that may be lending; however the results will most likely be disappointing. The more companies and firms that you pitch your project, the less likely you will secure the funding you are seeking. Word spreads that your proposal for funding was turned down by firm A. Firm B is aware of this and is skeptical of your project from the start and continued skepticism from future potential lenders soon kills any chances of you acquiring the funding you are seeking. Shopping your financing to numerous potential lenders can seriously jeopardize the chances of securing your funding.

But how can I avoid this trap?

I highly suggest partnering with a financing broker. These professionals specialize in matching up the appropriate lender to their clients financing needs. It's not so much what you know, as it is who you know in Commercial Real Estate Financing. You can submit your proposal to Firm A and let's say your project is turned down. It may not have been turned down for any other reason than the proposal was submitted to the wrong division or individual.

Recently I secured funding for a major Real Estate Development project; the client was shocked to learn that the lender I had secured for the funding of his project was one of the very firms that had previously turned down his proposal. Initially when I began working on the client's proposal I was a bit baffled this particular firm had not swooped up the project; it was right up the lending alley. I made a phone call to the officer that I frequently dealt with at that firm and explained the situation. He looked into it and discovered that the proposal was made to an unrelated division of the company. The client's original proposal was not declined because it was not found sound or viable, but the proposal was submitted to the wrong officer of the firm. Having worked with this particular officer on numerous fundings, he and I discussed the project briefly and the officer requested a complete loan package. Long story short, a letter of intent to lend was issued a week later and my client went into closing shortly thereafter.

A financing broker has the inside track when it comes to Commercial Real Estate Lending; there is no guess work, it's their job to know who the decision makers are in this competitive lending field. Financing Brokers, just like lenders, have specialized fields that they have knowledge and expertise. Partnering with a financing broker who specializes in the field of financing you seek could be the difference between securing the funding you require or sitting on an unfunded project.

Business Lines of Credit Overview

A business line of credit is an extremely important financing tool for your business. This is primarily due to the fact that this type of financing works in a very similar manner to that of a credit card. When you are granted a credit line from a bank, you are able to draw down on the balance as needed. Conversely, if you were to receive a business loan then you would be responsible for making regular interest and principal repayments on a monthly basis even if you are not using the entire amount of capital that was approved. If you have issues pertaining to maintaining a positive cash flow at all times, even though your business may be profitable, then it may be in your best interest to seek this type of financing in order to more smoothly run your business venture.

Businesses that can benefit substantially from using this type of financing facility include service based businesses, companies that carry a significant amount of inventory, and specialized businesses that frequently have a number of outstanding accounts receivables. If you are involved in a medical field, you can use the anticipated payments from insurance reimbursements as the appropriate collateral that will be required of your business. Prior to seeking any type of debt facility for your company, you should always work closely with your certified public accountant so that you can understand the risks associated with undertaking a credit obligation.

As it relates to a small business using a line of credit, you may to investigate the programs that are available through the Small Business Administration. The most popular avenue for this financing is the usage of a SBA Micro Loan which can be arranged as a revolving credit facility. However, it should be immediately noted, that you are going to need to provide a full personal guarantee for this obligation.

When you are applying for this type of financing then you should make sure that you have the appropriate collateral to secure this debt. In most circumstances, a bank or financial institution is going to want to ensure that a tangible asset can act as a security for their investment. Typically, you can use personal assets such as your home, vehicles, retirement accounts, and selected business assets for this purpose.

If you do not qualify for a traditional line of credit based on your personal assets or business assets then you can seek a number of different alternatives. One of the most popular ways to obtain a credit line is by allowing a third party to use your credit card receivables or account receivables as collateral. However, this method of financing is generally very expensive. If you decide to use this financing methodology then you can expect to pay a yearly interest rate of 15% to 25% depending on the regularity of your revenues. When you are seeking any type of revolving financing facility it is extremely important that you review all of the potential options available to you.

In conclusion, a business line of credit can truly assist your business if you have complex and ongoing financing needs. If you are able to obtain this financing through the Small Business Administration then you can expect highly competitive interest rates as well as flexible repayment terms.

Low Interest Business Loans - Are They Worth Choosing?

No matter what the state of economy is, almost every entrepreneur needs business loans some time or other in business life. Also, any business owner would prefer to get the loan at lowest possible rate of interest available. Every one of us is trying to save some money and work on cost setting in one place or another. But, sometimes only the rate of interest is not the only factor that will help you pay less for your loans. You need to get financial advice in this regard or read some of the articles available on internet or in different magazines.

If you are in need of money and you come across low interest business loans, you automatically get attracted towards it. Remember, it can be a new marketing strategy by the lender or the bank. The lender is not going to tell you the whole story and will never let you know about the hidden costs unless you actually point on them. It is obvious that the lender is in this business because he also has a desire to earn profit. Everyone wants to get more and more profit in their business and this industry is based mostly on profit making attitude.

There are few more things that matter when you apply for business loans. Research a little on the lender or the bank and learn details about the lending institute. Find out what type of relation the lender has with its borrowers. Do not forget to read reviews if it is an institute. Gather as much information as possible about the lender and then decide whether he is fit for your needs or not. In today's market you should not take any kind of business loan offer lightly. Consider the benefits and costs simultaneously and take the decision only when you have analyzed and compared everything wisely.

Selection of the lender is very important here. So, take this step prudently and make sure you research well about the lenders, banks and lending institutes in your area. Along with the rate of interest, see how long is the loan tenure and whether or not there are any hidden costs. Ask the representative about it and make it clear beforehand. The lenders also know that business owners get caught up in when there is question of cost saving and so they advertise about the low interest rate. However, on your part, even when you finalize the lender, go through the agreement papers cautiously and read it in detail before signing it.