Business Finance and Commercial Mortgage - Home Loan Differences

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 many critical differences between residential real estate investing and commercial real estate investing. Of the approximately 25 key business finance differences, some key factors will be addressed in this business loan report and other business financing factors will be discussed in a separate article.

Stated Income Business Loan Options

Unlike residential mortgages, no documentation or no doc loans are not an option for business financing. Stated income business finance alternatives will avoid the requirement for an individual to provide personal tax returns. In spite of this benefit, the stated income business loan process will not avoid the requirement to document income for the business being refinanced or purchased.

Commercial Mortgage Down Payment

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

It is very difficult to obtain a commercial mortgage less than $100,000. A normal maximum for a stated income business loan and SBA loan situations is $2 million. A number of other business finance programs are limited to $5 million.

Interest Rates for Business Opportunity Financing and Business Loan

Business finance interest rates are commonly more than residential financing interest rate levels, with an average current range of 8% to 12%. It is usually feasible to have variable and fixed business loan rate choices. Financing for a business opportunity will usually have higher interest rates which are generally in the range of 1-3% more than a similar commercial mortgage.

Personal Guarantors for Business Opportunity Financing and Business Loan

In most situations individuals owning over 20% of a business will be required to personally guarantee a business loan. Although it is common for a business to be operated under a corporate ownership structure, personal guarantees from the principal owners are nevertheless required for most business financing. Individual credit scores of all principal business owners will be reviewed as part of the qualifying process for a commercial mortgage.

Business Loan and Commercial Mortgage Appraisals

It is normal for commercial property and business opportunity appraisals to require over a month to complete. Commercial appraisals are much more complex and expensive than residential appraisals. Business opportunity financing and commercial loan value is traditionally based on business income rather than a comparable property analysis used in residential appraisals.

More Business Finance 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.myaddirectory.com

About S.A. Bush: Steve provides candid working capital loan and commercial mortgage advice. Free AEX series of Business Opportunity - Business Finance - SBA Loan reports

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