Finance Loans CA

Commercial lending is a complex process that is very far removed from residential or personal lending.

What is it?

It is loans that are written to businesses for a host of reasons. Usually it revolves around expansion or securing property for a business.

How does it Work?

Usually a bank or finance company even sometimes private investors are willing to lend a business some money to get the business where it needs to be. It is different from personal or residential lending in many ways.

It usually has minimum limits, it would be very unusual for a commercial entity to walk into a lenders office and ask for a five thousand dollar loan. Small loans are usually handled through a line of credit. It is especially for property typically starts at the two hundred fifty thousand mark. It just makes sense to the banks and other lenders to have a minimum.

The lending process is also different from personal or residential loans. With this type of lending there are a lot more documentation that is required. There may be requests for three previous years worth of financials and taxes and a host of other information that would never be requested to write a personal or residential loan.

It is for the purchase of property usually requires a couple of site inspections and business plans. It is for property usually also has to include business plans to justify it. Sometimes with this type the owners, partners or sole owner has to put up there good credit to secure it. It is an additional safety net that is used by the lenders to be sure that the loan is going to be repaid. In cases where personal credit is used the person that is putting up their good name can be held liable for it if it has gone wrong. This is a very bad idea and should be avoided.

Who does it?

There are a few options. There are traditional banks that almost always do it. There are nontraditional banks that do it. There are funding agents that do it and there are private investors that offer it. Each entity will have different requirement and different rate schedules but they will all have plenty of forms and paper work to fill out and provide.

It is the only way that some businesses can grow. It is offered from many different avenues, it is a difficult process to navigate but is well worth it in the end for the business owners.

Commercial lending is almost always used to secure property and to expand.

If you are interested in this type of lending, go to Commercial Lending for more information.

Commercial Lending FAQ:

Question: Does anyone know the rate for a commercial lending?
I’m currently living in mexico and I want to invest in usa. I have some money to buy a commercial land but I don’t know the rates for a commercial lending to build a strip mall in that land so if anyone knows whats the rate for a 1,000,000 usd commercial lending I would be greatfull.

Answer: Most lenders have strict rules about lending to people outside of the country. Call a commercial real estate broker located in the area where you want to build and see what kind of advice they can give you.

Question: What is a spread in regards to commercial lending?
My husband and I are in the process of purchasing a business. The banker has all the information necessary and has sent the application to underwriting. He said that he should get the spreads back today and will call to discuss, but I don’t know what he means by spreads…can someone explain this?

Answer: My sister worked at a bank & from what she told me was that the spread is a basis of points or a percentage of what the business that you’re buying into produces. The Bank wants to make certain that the amount of cash that’s made from the business is current to the market price.

Question: Commercial Lending?
Does anyone know anything about the Commercial Lending job market? I am interested in learning more about it. Salary ranges, Financial Certifications required, Hours, travel. Also, how does someone break into this career? Entry-level jobs for graduates?

Answer: There are several local banks in my area that have commercial lending departments. Perhaps banks in your area have the same. You could call the bank to inquire as to job opportunities within that area. Salary ranges will depend on where you work (the area), the job requirements and such. I think they start here around $50,000 yr.

Question: How the growth in commercial paper and junk bonds has affected commercial lending and yield spread at banks?

Answer: It’s made their assets worthless, and made it much harder for them to profit on a broad spectrum.

Question: Commercial lending statistic?
Could somebody show me the website which contain the total commercial lending for business and household both by banking industry as well as by dedicated lending firms.

Answer: There are pay sites that might have this data but I don’t know of any that give a breakout like you ask for. The hard part is the specifics on each firm.

Question: Re: commercial lending- what is mezzanine financing?

Answer: Mezzanine loans are similar to second mortgages, except a mezzanine loan is secured by the stock of the company that owns the property, as opposed to the real estate.

If the company (usually a LLC) fails to make the payments, the mezzanine lender can foreclose on the stock in a matter of a few weeks, as opposed to the 18 months it often takes to foreclose a mortgage in many states. If you own the company that owns the property, you control the property.

Mezzanine loans are also fairly big. It is hard too find a mezzanine lender who will slug through all of the required paperwork for a loan of less than $2 million. It is occasionally possible to obtain mezzanine loans as small as $1 million.

Question: What is commercial lending?

Answer: Commercial Lending is lending money for commercial reasons. Commercial = business. It can be to start a business, to buy a building that will become a business, to buy more things for a business. It’s basicall anything that has to do with a business. Anything having to do with your personal life such as your home, car, credit cards is called Personal Lending.

Question: How does Seller Finance and Commercial Lending work together on a deal?
I outlined what I “think” it is below.

Lets say you have a building for 1,000,000 at 6% Interest Only for 5 years. Seller is willing to carry back 80% (800,000). Lender is willing to finance the remaining balance with 20% down (So this equates to 40,000 cash you need to bring to the table) 160,000 is the amount the lender is going to finance. I am assuming that the lender has the first position with his loan and the seller finance goes into the second. What can be done to protect the seller should the buyer default on the loan?

Answer: Well, you’ve got the basic theory down but your execution is a bit flawed. First of all Seller financing can only be done if the seller owns the asset free and clear of any debt (he could have some debt on it but that would make it an AITD and totally different).

The lender would be foolish to allow the buyer to come in with nothing down thus 20% down would make for a vested interest in the property from the buyer. The Seller would then finance the 80% at an agreed upon interest rate usually interest only so as to avoid partial capital gains tax on the principal paid back. There would be no lender involved and the Seller would in effect act as the bank.

Using your illustration then, on a $1,000,000 purchase, the buyer would put down $200,000 and the seller would finance $800,000 at 6% interest only for five years. The Buyer would then make 60 installments of $4,000 and then have a balloon payment of $800,000 due at the end of the 60th month.