If you’re a business owner, you’ve probably heard of commercial mortgages, but you may not be entirely sure what they are or how they work. This blog post will give you a crash course in all things commercial mortgages. By the end, you’ll know whether or not a commercial mortgage is right for your business.
What is a commercial mortgage?
A commercial mortgage is a loan used to finance the purchase of commercial property, such as an office building, retail centre, warehouse, or hotel. Commercial mortgages are typically given to businesses that demonstrate strong creditworthiness and the ability to repay the loan.
Like a residential mortgage, commercial loans are secured on property and run the risk of repossession if missed payments are made.
With a commercial mortgage, the security is usually commercial property, with the loan having a shorter term than other loans, such as 15 years, compared to 30 years for a conventional mortgage.
What are the benefits of taking out a commercial mortgage?
There are several benefits to taking out a commercial mortgage. One is that it can help you keep your business’s financials separate from your personal finances. This can be helpful for tax purposes and retirement or exit planning.
If you’re thinking of taking out a commercial mortgage, here are some tips on how to get started:
1. Shop around for the best deal. There are a lot of different lenders out there who offer commercial mortgages, so it’s important to compare interest rates and terms before you settle on a lender.
2. Get pre-approved. This will help you know how much money you’re eligible for and will give you a competitive edge when negotiating with sellers.
3. Have your financials in order. Lenders will want to see a solid credit history and a track record of successful business operations before approving a commercial mortgage. Spend plenty of time refining a business plan.
4. Be prepared to put up some additional security. Most lenders require some form of collateral for a commercial mortgage, so be prepared to offer up your property or assets as security. This can include the property that you’re purchasing with the mortgage, as well as other assets.
5. Have a detailed business plan ready. Lenders will want to see that you have a solid business plan and are likely to successfully repay the loan. Make sure you clearly articulate your business’s financials and strategies for growth.
6. Get everything in writing. Once you’ve found a lender you’re interested in working with, make sure to get all the loan terms in writing. This includes the interest rate, the length of the loan, and any fees that are associated with it.