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 numerous significant distinctions between commercial real estate investing and residential real estate investing. Of over 20 major commercial loan differences, several important issues will be covered in this business financing article and other commercial financing elements will be described in additional reports.

Stated Income Business Finance Possibilities

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

A down payment varying from 10% to 25% (sometimes higher) will normally be required to buy a business. These requirements can differ based on a number of issues including whether a business opportunity business loan is involved, credit scores, business experience of the borrower, type of business.

Commercial Mortgage and Business Opportunity Financing - Size Limitations

Commercial property loans and business opportunity financing less than $100,000 are not routinely available. A typical maximum for a stated income commercial mortgage is $2 million. Several common business financing possibilities are limited to a $5 million maximum.

Interest Rates for Business Opportunity Financing and Business Loan

Commercial mortgage rates are usually above residential financing and rates, and an average range of 8-12% is currently likely. Borrowers can choose between fixed and variable business finance rate options. Business financing involving a business opportunity (without real estate) is likely to include interest rates up to 3% higher than an equivalent commercial property loan.

Commercial Mortgage - Business Finance Personal Guarantor Requirements

A personal guarantee from all principal owners is usually a standard requirement for business finance situations even when a business is titled under corporate ownership. Because of this, individual credit scores of the business owners will be an important factor to qualify for a business loan. Individuals should expect to personally guarantee a commercial mortgage if they own over 20% of a business.

Appraisals for a Commercial Mortgage or Business Opportunity Financing

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.

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