Commercial lending takes place when a funding source loans capital to a business. This loan type consists of a stricter procedure than what takes place with personal lending to individuals, which mainly features background checks and credit reviews. Commercial lending guidelines can differ by institution, yet a general rule of thumb is the amount of funding lent depends on different factors that influence a business.
Companies utilizing commercial lending need to follow the same statutes of their home-state banking laws, credit reports and credit balances.
Commercial lenders like to meet in person with business owners, and wishing to meet at and see the facility of the business is indeed common. It’s certainly understood by lenders that whether or not a business will be successful will be the main factor in determining if they can repay their loan. This is why commercial lenders have loan officers to rigorously review business plans prior to lending.
The loan officers assess the expected cash flow of a business plan to make sure the company receiving the loan will have enough money to manage any possible financial issues. Loan officers also work with the lender while reviewing the loan-to-value ratio of the property of the company their lending to, and a preference is usually for the company to have an LTV of 80%.
Commercial lending doesn’t credit into much consideration. Lenders have the option to review the credit of an established business. For newer businesses, commercial lenders may decide to check the owner’s personal credit.
The collateral is the main way repayment for a commercial loan is funded. It’s so significant that it can be the difference between approval or denial of a business attempting to acquire a commercial loan.
“Acquisition and development lending” is the perhaps the most popular form of commercial lending. It consists of financial sources awarding funding to businesses based on the probability of success stemming from their expansion and development plan. When a business is approved for this particular kind of commercial lending, the expectation becomes that the funding will be utilized in an effort aid the prosperity of a business through property obtainment and development.
Failla Funding can assist residents of Queens, Long Island, the Bronx, Brooklyn and Manhattan with commercial lending. To get started, call (718) 966-6760 or (917) 294-1506 today!