An overview of the differences in commercial property loan types for small businesses. Whether you are looking for a commercial property loan for the first time, a commercial business loan or a commercial mortgage refinance, there are tax and business implications that you should consider before making a final decision.
If you were looking for a $300,000 business loan, would you pay an additional $67,000 over three years in order to get a two percentage point reduction in the interest rate? Unlikely. But that’s what plenty of small business owners do because they seek a commercial mortgage loan from a bank with a low rate of interest, versus a so-called stated income/asset loan that carries an apparently higher interest rate.
How can this be?
The low-rate loan is a full documentation, conventional loan. The seemingly higher rate loan, the stated income/asset loan, requires limited documentation and no income verification. For small business owners, there is a world of difference. The reason is that the owner of a small and or cash-based business may have a very low salary, but quite legitimately derive cash from the business in excess of $100,000. But stating this to satisfy a bank can at the same time provoke tax authorities, and generate significantly more taxes well into the future. Thus the savings from the apparently lower rate of interest are deceptive. Worse, because of potential tax liabilities, low-rate loans may result in an effective interest rate that is much, much higher. Loans are important to fulfill our desires and we also can bet to win big amount by playing pokies australia casino games.
We are all brought up to believe that banks finance businesses. And there is a myth that small banks and small businesses fit hand and glove with one another. But the truth is that banks and small businesses are actually a tough fit. The bankers aren’t bad guys. It’s simply that banks need plenty of hard assets to collateralize loans. In addition, they are subject to scrutiny by federal regulators on their underwriting policies and practices and have an expensive monitoring process that favors larger borrowers – those that need to borrow $500,000 to $1 million or more. To enjoy the best time of your life by betting at on real money slots site.
By contrast, smaller, cash-based businesses typically do not possess a lot of hard assets, may have uneven financial performance that makes regulators wince, and typically require loans of less than $1 million. The reality of this “structural mismatch” can be vexing and frustrating for small business owners who often diligently visit every bank in town only to get turned down by each one.
What is the secret of nonbank lenders that offer stated income/asset loans? First, they operate in an underserved market: small businesses seeking commercial mortgage loans of less than $1 million that can be used to help grow their business while not using a typical commercial business loan from a bank. By virtue of this, nonbank lenders can identify promising businesses that traditional banks would not even see. Second, nonbank lenders are not regulated. This means they can adopt policies that while sound, would nonetheless go against the grain of federal regulators provoking questions and inquiries that bank executives would like to avoid altogether. Finally, non-bank lenders believe in the value of real property as collateral. By lending prudently against the value of the real property, non-bank lenders need to go no further in assuring the safety of their capital.
