Generally, when most people think of mortgage lenders, they think of banks first. While banks can be an excellent source of funding for your next commercial mortgage loan, it is important to understand that they are not your only option. A variety of commercial mortgage funding sources exist and choosing the best one depends upon your specific needs.
Time Versus Budget
Obtaining a commercial mortgage loan from a bank takes much longer than if you were to apply for a loan on a home. Commercial properties are much riskier to loan money for than residences, therefore, a bank will closely scrutinize your property and probably your business as well. They require extensive documentation, including statements, tax returns and more.
Banks have a reputation for offering lower interest rates than other lenders, however, and if you have great credit, a positive relationship with a local bank and aren’t in a rush, a bank is generally the best choice in funding a commercial mortgage.
Commercial Mortgages for Small Businesses
Some small businesses don’t have the kind of financial documentation that a bank requires and should therefore investigate other sources of funding a mortgage. This is also true if you are not willing to spend weeks going through an approval process.
Though private commercial mortgage lenders often apply higher interest rates, they require much less paperwork and can approve your loan in just days. Private commercial mortgage loans are usually funded by wealthy individuals or other large pools of capital. They are less concerned with the borrower’s credit and more with the equity in the property.
Commercial Mortgage Brokers
Finding a lender for your commercial mortgage loan is very time consuming and requires considerable research. If you don’t have the time to spend doing all of this yourself, you may benefit from employing a commercial mortgage broker. Brokers do the research themselves, finding the best available loan rates for you. They also already have long-standing relationships with lenders and can negotiate favorable loan terms that would otherwise not be available to you.
