This calculator will compute the payment amount for a commercial property, giving payment amounts for P & I, Interest-Only and Balloon repayment methods -- along with a monthly amortization schedule. Show
Today's Best Redwood City Mortgage RatesOur rate table lists the best current Redwood City mortgage rates available from our lender network. Set your search criteria by entering your loan data and selecting the relevant products from the dropdown, click search and we'll help you compare the market by showing you the most relevant offers for Redwood City homeowners. Understanding Commercial MortgageIf you are looking to start up your own business, there are several factors that must come into play before you can move forward toward a successful future. One thing to consider is how to finance your business and get product and services moving. There are several ways to finance your business including savings, investments and utilizing equity from your home or other assets. Chances are you will have to acquire a commercial mortgage in order to give you the borrowing power to fund your inventory and pay for receivables. The first step in getting your business off the ground is getting approval through a lender. You will have to make sure that you have a good credit score and a solid history of credit worthiness. How Much Should You Borrow?Some of the main goals of obtaining a commercial loan is for maximizing business profitability, increasing your working capital and strengthening your competitive position in your industry. Knowing exactly how much you should borrow should be something you should figure out before seeking financing. According to the U.S. Small Business Association, the average loan amount in 2012 was around $337,730. Some loans have a maximum lending amount of $5 million dollars. The amount you wish to borrow depends on several factors such as:
Depending on the interest rate you qualify for based on your credit score and past credit history, the loan officer will calculate how much of a loan you will qualify for. Things to consider include the loan amount, qualified interest rate, term of the loan and any additional costs to the monthly payment. These calculations will tell you how much your monthly payment will be and how much interest you will be paying on the loan over its lifespan. If you are trying to finance an existing business, there are several advantages. The first step is preparing a business plan is taking a look at your past financial history. This includes financial statements and graphs from existing and prior years. Write up a statement that displays the assets that you are using to secure or back up the loan. Showing the financial institution that your business has been profitable in the past will increase the chances of loan approval. Past profits may significantly increase the amount they will lend you as well. How much loan you will need depends on several factors. Are you acquiring a new building or making improvements to an existing one? Do you need new inventory? Are you using the loan to pay off existing debt? As long as you can justify a future profit margin and benefit to taking on more debt, you shouldn’t have a problem with approval as long as other requirements are in place. Some banks may only lend to you on a short-term basis at a higher interest rate to see if there has been a significant profit margin and then offer better loan terms after the trial period. How Long Does it Typically Take to Get a Commercial Loan?There are many different financial institutions that will lend to you if you qualify. The question is where should you make the first inquiry? If you have a financial institution that you have banked within the past, they should be your initial contact. Even if they don’t advertise good commercial interest rates, they may be able to give you special financing just because you are a current customer or have banked with them in the past. Every circumstance is different and it is important to inquire before you decide to apply. Generally, once you start the application process, you can expect to receive a preliminary answer or preapproval that same day or the next business day. This does not guarantee loan approval or the line of credit they will be offering you. Several things including running financial history reports, more in-depth credit checks and reference checks could take up to 10 to 20 business days. Once everything is in place, the loan then goes to underwriters who will carefully decide on a face to face basis if they feel they should lend to you. In some cases, they may want to meet you or other investors who will be contributing toward your business goals financially. Once it is approved through underwriting, the next step is setting up the loan terms and signing the final loan documents. Benefits of Banks vs. Non-Lenders
Having a bank that reports all of your on-time payments and credit limits will sustain or improve your overall credit score and credit ranking. This will help with future loan qualifying requirements. A traditional bank is also a safer way to access as well as manage your loan funding. Utilizing your checking account, ATM card and personal withdraw when you need it, makes it a safer way to access, track and manage your money. You can also write checks and pay for bills out of your commercial loan account. Writing checks and automatic withdraws are not feasible if you are going to a non-lender or non-government-backed financial institution. Another benefit of going through a bank as opposed to a non-lender is that the terms of your loan can be re-wrote or reformatted at any time. This means that if your financial situation changes that payments can be lowered in interest rates adjusted if need be. The drawback of going through a nontraditional lender is that the fees and provisions that were set in place before borrowing money often stand whether the loan is paid off early or not. Another advantage to going through a bank is that they are often backed by government-sponsored loan guarantees. This means should something happen with the bank or the business gets bought out at anytime during the life of your loan, the government will guarantee payment to you that funding is available. There are also 7(a) and 504 loans available through the small business administration. These loans assist with financing for real estate, inventory, equipment, business acquisition startup costs and partner buyout's. These loans range anywhere from $250,000 to over 10 million dollars. Commercial loans funded by banks can be used to make special purchases and financing can be reorganized as further needs may occur. For instance if your business grows into a franchise, a bank can easily recognize these needs and give you the additional working capital that you need. Maybe you need to buyout partner in additional funding to do so. A bank will be able to refinance your entire loan so that you can pay off your partner and move on independently. One thing a bank can do as opposed to a non-lender is consolidate multiple existing loans that may currently finance your equipment, machinery, inventory and vehicles. Either consolidation is an option or working to lower interest rates by offering a future balloon payment may be a viable alternative to paying multiple loans at once. Drawbacks of Banks vs. Non-Bank LendersIf you have been considering seeking financing through a non-traditional method such as a silent investor, there may be some risks involved. The investor may have certain stipulations or high expectations in making sure that he gets his money back and then some. This could mean if you don’t make a profit, he will pull all funding or he may request that some form of your personal property be put up as collateral. Examples of collateral may include:
The agreement may be only verbal or not notarized. This can pose a serious issue that could lead to both of you facing each other in small claims court. The outcome could be disastrous especially if the non-lending partner is on the deed to your business. You could lose a lot of time and money invested she the case go to court. By choosing a financial institution, you have certain rights given the terms of the loan that will help protect you should you be late on a payment or your financial situation changes. Some defaulted commercial loans can be discharged appropriately under federal bankruptcy laws, whereas seeking financing through a non-lender can cause complications with a bankruptcy discharge or other forms of repayment programs. How do Commercial Mortgages Differ from Traditional Mortgages?Commercial mortgages differ from traditional mortgages in that there are more items listed under the terms of the loan. This means that all of the buildings, furniture, inventory, as well as start up costs are included as part of the loan proposal. A traditional mortgage typically just lists the property, structures, dwelling and sometimes other larger property features. For a traditional mortgage loan, provisions are straightforward and payments are based off the current interest rate or if it’s an adjustable rate mortgage, the payments may fluctuate. Property appraisals generally follow the basic criteria of loan approval for both types of loans--residential and commercial. A home appraisal is unique because each real estate transaction is different due to the condition of the home and property at face value. Once an appraiser conducts a traditional real estate appraisal, he looks at the market value of the home or property. The market value is based off of what other homes in the same price range are selling for. The real estate appraiser may look at a previous appraisal, if available and compare it with any improvements that have been made since then. The appraisal is then used as part of the final decision process for loan approval. The commercial mortgage appraisal will take into to consideration a lot more than just the property value. It will also include things such as both the insurable value and liquidation value of property. Often times the lending institution or mortgage broker will order a commercial appraisal as opposed to the borrower. Part of the appraisal process must include a conditional commitment letter or term sheet signed by the bank. This is a good faith letter showing that the borrower has met the pre-approval criteria for loan approval. With both a commercial loan and a home mortgage loan, the appraisal is an important part of the approval process. The difference between the two is that a commercial loan appraisal can take up to 30 days longer than a traditional mortgage appraisal. Another difference between a traditional mortgage and a commercial mortgage is that there may be more than one party on the loan. For a home mortgage, it is often an individual or a married couple that apply for the loan. There can be investors or other parties that use both of their credit to apply for a loan but generally it is only an individual or two people. For a commercial loan, several investors may have applied and will need to meet criteria prior to closing. This can be tricky unless every individual has spotless credit and no underlying causes for loan rejection. Balloon Payments and RisksMaybe part of your commercial loan package includes a balloon payment. A balloon payment occurs when the lender decides that they want a lump sum of money at some course over the life of the loan. These stipulations are always set in place prior to the final terms of the loan being presented to the borrower before signing. With a balloon payment, it means that you will have to pay a lump sum of money at specified times during the life of the loan or at the end of the loan. The term "balloon" was given its name because of the blown-up or large amount of money that pops up within a loan agreement. These terms vary per lender and are often seen when you do a land contract or seek a private, alternative commercial loan. How it works is that the loan is amortized or spread out over a long period of time. With a balloon payment, the payments are generally interest-only or low-interest for the first three, five or ten years. At the end of a specific time frame or date, a balloon payment is required to pay off the entire amount of the loan. This means you will have three options:
You will have to find out if there are certain stipulations on the loan. In some loan terms you can pay off the balance of the loan minus the balloon payment if the balloon isn't due within the next few payments. While a balloon payment can help you get your business started with initial lower loan terms, the payment can also come back to bite you, down the road. Sometimes a balloon payment is also referred to as a bullet payment. This happens when a large sum of the debt suddenly becomes due, placing a burden on the business and the borrower. This can be financially crippling and in some cases doesn't make sense if the funds are not readily available to pay off the terms of the loan. If your business is not stable or has been experiencing financial setbacks, a balloon payment may lead to a downward crumble of not being able to pay back the loan as well as other business and personal expenses. Failure to pay off a balloon payment can lead to the loan accelerating and becoming due and payable immediately. In some cases, the bank will try to collect on the loan and expect all outstanding payments to be due, otherwise foreclosure could take place. If you suddenly find yourself unable to meet the terms of a loan agreement, in particular an upcoming balloon payment, the first thing you should do is contact your lender. Your lender may be able to discuss repayment or loan restructure options with you. You may also be eligible for refinancing so that you can eliminate the balloon payment and get into a loan agreement that is affordable for the long term. While a balloon payment option loan may seem appealing now, consider if your company has enough potential growth or optional funding to meet those bulk payments once they arrive. Hidden CostsIt is important to note that there may be some hidden costs with a commercial loan. It is important to have your attorney look over any real estate or loan documentations before you agree to sign them. Hidden costs may not appear right away or be listed in a checklist section on the loan documentation. They can arise under certain terms such as these:
Examine all of these terms before signing to assure that the fees are fair in comparison to what other lenders are charging. In some cases, you may be able to get the bank to waive these fees. Documentation Needed to Acquire a Commercial LoanPart of inching closer to closing on your commercial loan, means you will have to provide proofs and documentation before the loan can be finalized. While these are the general criteria requirements for the loan, your loan officer may ask for more or less documentation depending on their loan practices.
Commercial Loan ConditionsAs part of the underwriting process, bankers often have a risk assessment already in place to determine if they should grant a loan. Once credit scores have been run and documentation has been verified, they take one last look at the financial plate of the borrower to decide if they truly should take a risk and build a business relationship. Sometimes loan conditions are based upon the 5 C’s of commercial lending qualifications:
Commercial Loan TermsThere may be some loan terms as set forth by the lender in the agreement. One of these may be a pre-payment penalty. This means if you decide to pay off the loan or cash it out prior to the end of the term, you could face pre-payment penalties. Pre-payment penalties vary per lender but generally range anywhere between 2 and 4 percent of the loan. The reason for this is to guarantee the bank makes money, even if you decide to take your business elsewhere. Banks often refer to this as a profit calculation or risk calculation. It is important to check your loan documentation or contract and have it closely examined by your attorney to assure that there are no pre-payment penalties and if there are, if you are willing to risk those penalties and still close the deal. Not all pre-penalty clauses will hurt you, especially if you have a good interest rate and plan on paying off your loan all the way to the end of the loan term. Commercial lending is something to take seriously. You are borrowing a lot of money to invest in your future, so it is important to maintain a good working relationship with your lender. As long as you keep up with proper business practices, you can expect growth and many years of success as you work on paving a good future. The SBA offers a wealth of information on this topic. What is a good interest rate on a commercial loan?Average commercial real estate loan rates by loan type. What is the current interest rate for commercial mortgages in USA?For conventional commercial mortgages the current rates are between 6.19% and 9.00%.
How long are most commercial loans?Commercial mortgages come in short terms of 3, 5, and 10 years. Others stretch as long as 25 years. But in general, commercial mortgage terms are not as long as most residential loans, which is usually 30 years.
What is the average interest rate on a commercial mortgage UK?Most loans come in between 2.35% and 6.5%. Generally speaking, the higher the risk, the higher the interest rate charged.
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