Business Opportunity Financing and Business Loan Basics

There are approximately 25 critical differences between residential real estate investing and commercial real estate investing. Because more residential real estate investors are exploring commercial real estate and business finance opportunities, this business opportunity financing and business loan report is designed to help educate new commercial investors about key commercial mortgage and commercial loan issues.

SBA Loan Financing

Small Business Administration loan programs are an important consideration in many business financing and commercial mortgage situations. There are also problems and limitations with SBA business loan programs that should not be overlooked. While all business borrowers will not qualify for these business finance approaches, it is probable that many borrowers will benefit from inclusion of SBA loan financing.

Business Loan Choices for Business Opportunity Financing

Financing to buy a business opportunity is frequently complicated because real estate is not included in the financing of the business purchase, and normal business financing is not feasible. There will be fewer prospective lenders, and requirements such as length of loan will be materially different than with a commercial property loan.

Commercial Mortgage Balloon Payment Terms

Some commercial lenders will use balloon payments as a substitute for a true long-term commercial mortgage. With balloon payment terms, a commercial borrower will be faced with a large lump-sum payment that is due after a typical period of three to ten years. At that time, if borrowers are unable to afford such a large payment, they will be forced to either sell their business or refinance their business loan or business opportunity loan.

Length of a Business Loan

It is very common for traditional banks to limit their commercial mortgage and business loan terms to a period as short as three to five years. Longer-term business finance terms are available but only from a relatively small number of commercial lenders. Some specialized situations such as business opportunity financing are typically limited to ten years or less due to the lack of commercial real estate as collateral.

Recall Provisions for a Commercial Mortgage Business Loan

A recall clause is one of the least desirable business finance terms offered by a business lender. If a business loan agreement includes such terms, a lender is permitted to require early repayment of the commercial mortgage under specified conditions. The terms which can cause the lender to call the commercial loan will vary but will commonly include periodic lender review of financial statements, tax returns and credit history.

Thinking Outside the Bank for Commercial Mortgage Lenders

Local and regional banks are not likely to be the best commercial lenders for business opportunity loans and commercial mortgage loans. Traditional banks have recently served a reduced role in most business finance circumstances and are even more restricted in successfully working with specialized business financing situations. Almost all commercial loan scenarios are more difficult than residential financing. A practical commercial borrower should insist on lenders established as business finance specialists.

Additional Key Business Finance Issues

The business finance environment in the United States has many factors that distinguish it from residential financing. The factors not described in this report are included in other business loan reports. A few of the topics not included in this report include stated income business financing, the difficulty of refinancing an SBA loan, commercial loan appraisals and commercial financing lockout penalty fees upon sale or refinancing.

Copyright 1995-2007 AEX Commercial Financing Group and Stephen Bush. All Rights Reserved.

Article Source: http://www.articlesinsight.com

About S.A. Bush: Steve will provide candid SBA loan - commercial loan advice. Get a free series of Business Loan - Business Opportunity Financing reports

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