Attributes and Advantages of a Commercial Mortgage Loan
A Commercial mortgage loan is solely meant for business. It is a type of loan that is offered to business but with another business or commercial property as collateral. An in a scenario where the borrower fails to repay the loan the lender has the mandate to seize the agreed collateral in order to cover the loan. Here are some of the uses of commercial mortgage loans.
- Buying a new space for a certain business to operate in
- Refurbishing an existing business space
- Investing in commercial or residential spaces
For one to get a commercial loan he or she has to fill out an application form indicating the business’ trading history, its income sources and resources and the credit-worthiness of the borrower.
Advantages of commercial loans
Commercial loans are growing more popular than other types of loans simply because:
- Commercial mortgage loans give the borrower complete ownership of his or her loan. In that way, the lender can only claim the interest on the loan and cannot share any equity in the ownership.
- Commercial loans allow for capital accessibility as the repayment periods are long and some lenders always give discounts on early payments. This ensures there is a constant cash flow within the business. In addition, the borrower is given the freedom to choose which payment plan is favorable to him or her i.e. monthly, quarterly or annually.
- Commercial loans also allow the borrower and business to manage their finances in order to grow.
- Commercial loans allow for the payments of interests using pre-tax money because they are tax deductible. This gives the borrower a little tax break.
Advice and best practice when it comes to commercial mortgage loans.
As per its advantages, a commercial loan looks the best solution to your business needs. However, you should always repay your loan in the specified time failure to which your collateral will be seized by your lending partner. You need to always come up with a business strategy, plan, and financial statement before getting such a loan.
In addition, commercial loans always have very high-interest rates hence you have to choose your lending partner very careful in order to avoid futuristic problems.