Secret Commercial Loan Options
By: Ryan Attelle
Purchasing some commercial real estate for your business almost always turns out to be a wise decision. As of late it has been observed that overall property evaluations are over 30% lower than in the past and that we are experiencing a period of very low interest rates. This means it's prime time for business owners to take advantage of the opportunity to create wealth for there business. Rather than wasting money on rent, why not put it towards a mortgage payment, thus growing the businesses equity and appreciable assets. We intend to teach you some of the secrets you can employ to make sure you get the commercial purchase opportunity you are looking for.
Option 1: This will most likely be what is referred to as a conventional loan. With this deal you will be presented with 75% to 80% loan to value. This would make your mortgage $750,000 – $800,000. This also means that they will be looking for a $250,000 to $200,000 down payment. Many people will not be willing or can not put down that amount of money. When this is the case they usually turn to the next option.
Option 2: This can be compared to what is typically see in a personal mortgage. It is commonly known as an SBA 7 (a) loan. This option gives you a 90% loan to value ratio. This would give you a mortgage of $900,000 with a down payment of $100,000.
Options 3: This options goes largely overlooked, is rarely presented and there for is unknown to most. This loan is referred to as an SBA 504 loan. This breaks up the loan in to two mortgages. The first mortgage is a $500,000 mortgage, and the second is a $400,000 mortgage, bringing us back to the 90% loan to value ratio. So what is the difference, well the 2nd mortgage comes from what is called a government bond. These bonds are the lowest capital financing available to those looking to acquire commercial real estate. It is for this reason an SBA 504 loan can be the secret option just right for you.
If the SBA 504 is so great then why is this not usually presented as an option. Loan officers make there money from the size of the transactions they take. In this scenario the loan officer will be loosing out on $400,000 of the loan because the financial institution they represent will only be taking on $500,000 dollars of that loan.
Now that you are aware of the existence of a SBA 504 you may find it is the right loan for you. It is a great time for acquiring new commercial real estate for your business. The question is what loan is best for you and the growth of your business.
Remember banks are lending, if they were not they would go out of business. Be professional, and be prepared. With little extra effort you can greatly improve your chances of obtaining your first business loan.
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