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Commercial Real Estate Loans Under $5 Million
This article discusses several commercial real estate loan issues that commercial investors and advisors should be aware of before it's too late. The issues mentioned below are typical in conventional bank commercial real estate loans and should be avoided wherever possible.
1: Reported Income vs. Tax Returns
To apply for a commercial real estate loan, most conventional banks would take several years of tax returns. A Specified Income lender, on the other hand, does not check personal income or properties. Owing to high business costs, many borrowers would not qualify for a commercial mortgage loan if tax returns are used (and low net income). Many lenders who use tax returns will also check income after the loan is closed. This is something that specified income lenders would not do.
2: Properties with a Special Purpose
Obtaining commercial loans for special-purpose assets is becoming increasingly difficult. This special-purpose designation is often applied to properties that do not fall into the categories of apartments or retail/office buildings. This means that commercial property purchase loans ...
... for restaurants/bars and auto service businesses are frequently difficult to come by. Commercial funding for specialized properties like churches, funeral homes, nursing homes, and assisted living facilities would be much more difficult to come by.
3: Assets for sourcing and seasoning Ownership maturation.
This specific issue would not affect all commercial borrowers. If it's important, however, you should look for a lender who doesn't have any sourcing or seasoning requirements or limitations. To apply for commercial real estate loans, most banks have stringent rules for sourcing and seasoning properties or possession. Commercial lenders will often require documents about the source of the down payment when financing a transaction (sourcing). Commercial lenders frequently have very strict criteria that the funds must have been in a specific account for a certain amount of time, usually 3-6 months or longer (selective disclosure). Seasoning of ownership is similar to seasoning of funds, in that it refers to the amount of time a person must own a commercial property before refinancing it.
These are some problems that anyone can face while taking Commercial Real Estate loans under $5 million, once you will avoid all of the problems, you will be able to get all of the benefits from the end of the service provider, also they are very effective for the users in most of the cases.
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