Commercial Loan Defaults: Help

In most cases when applicants take on commercial loans, they do not take time to critically analyze whether they got the best deal possible. Many default in their loan repayment due to various factors. Quite undeniably, the business world keeps changing and hence business becomes gravely affected. The changes that take place may require one to reevaluate his or her position when it comes to servicing the commercial loans.

Refinancing the commercial loan is a good idea if defaults become eminent. Below are some of the benefits of refinancing the loan.

1. Refinancing the commercial loan may allow the borrower to benefit from equity gains. The impact of this is that one's capital can be freed and used for other ventures. This alternative is often termed as cashing out. It provides the borrower with the chance to invest the equity in more productive investments that have a higher level of return.

2 The rates of interest offered by other lenders may have declined significantly and hence taking advantage of this would be advantageous. If the loan repayments are reduced, the amount of cash flow is bound to increase which has a positive impact on one's financial strength.

3. Refinancing can provide the borrower with an opportunity to amalgamate the loans and realize an increase in cash flow and consequently take full advantage of the built up equity.

4. This is an opportunity to increase the loan period and realize additional cash flow in the process. The borrower can also benefit greatly from the tax concessions.

The above mentioned reasons are juts a few of some of the factors that would lead to one to opt for refinancing when faced with difficulties of paying back his or her commercial loan. Every individual or corporate will be faced with varying circumstances that will dictate different kind of responses.

While making a decision to go for refinancing, critically analyze the repercussions. Access the entire impact of your decision in terms of the implications of tax, benefits of cashing your equity, the impact on the financial statement, investment opportunities and any savings that will be made from making this move.

Before the decision has been made, the loan covenants have to revisited and readdressed. Flexible terms will be negotiated and should be weighed out critically to avoid making heavy and unrealistic commitments. Refinancing can enable the organization or individual enjoy a business benefit which would have been lost if refinancing was not considered.

Lower the Payment on Your Business Loan

It is hard enough to get a business loan these days. And, even harder if you want that loan to work for you - allowing your business time to leverage those loan proceeds to grow your business and repay the loan.

When most business owners consider a business loan they think about the interest rate as they don't want to overpay for the loan.

But, the interest rate on your loan might not be the most important factor in reducing your loan payment.

The term you negotiate may have more impact.

Let's take an example:

Your business is seeking a $100,000 business loan and gets offered one at 9% for 36 months.

This makes your monthly payment $3,180.

If you negotiate a lower interest rate - say at 7% - your monthly payment would drop by just under a $100 per month. A good savings but not spectacular.

But, instead of negotiating your interest rate you get the loan term increased by one year or 12 months.

This relates into a monthly payment savings of nearly $700 - making your loan payment $2,488 per month - much more affordable.

Now, while under this scenario your business could pay additional interest to the lender over the life of the business loan. But, as you can see, you can make up that difference in a short time from your monthly saving - further using that $700 monthly savings to fund other needs in your business.

Plus, the most important aspect of getting a business loan is using those funds for growth and expansion. If done properly you can use those loan proceeds to repay the loan through increase business or by improving operational efficiencies.

Thus, the additional interest that you might pay is far less detrimental to your business over the long term then either not getting a loan in the first place or having payments that are not affordable - potentially putting your business in a position to default and lose everything.

Moreover, in the following months that your business does have solid revenue, you can always pay a little additional principal to help reduce your overall interest.

If you have a great opportunity that you need outside business capital for but you want to keep your payments manageable - giving you time to reap the benefits from that opportunity - then the term on your business loan may have more of a positive impact in lowering your monthly payment then your potential interest rate.

Understanding Commercial Loans

Commercial loans are one of the most popular loans for entrepreneurs who want to start a new business or want to expand an existing one. A new venture necessitates a large inflow of funds. However, a large number of commercial loan applications are rejected both in the US and UK because people just do not understand the niceties of this type of loan.

A commercial loan is a loan that is primarily sanctioned for a specific business purpose. These loans are meant to encourage entrepreneurs. Why then do so many loans get rejected?

   1. Typically, most loan officers put loan applicants through the grind. Loan officers are paid to review applications and identify those that are most deserving. A review typically begins with two demands: one is for a business plan and the next is for copies of previous tax returns. So, the first step is to prepare a business plan, even in cases where the business is not a startup. This will convince the lender of the credibility and authenticity of the borrower.

   2. Sometimes, lenders are dissatisfied with the tax returns submitted by the applicant. Under the specified guidelines of the lender, such a business is not eligible for a commercial loan. One typical problem is related to the net income of the business once deductions have been subtracted.

   3. In some cases, the lender may be unable to give commercial loans for a particular type of business. For examples, most lenders do not offer financing for bars and restaurant properties. Another example is auto-service, which is slapped with a large number of environment regulations. Some commercial loans are special loans by their very nature. These include funeral homes, churches and gas stations. In this case, it is necessary to approach other lenders beyond traditional commercial lenders. Where traditional lenders do not grant the requested loan, a non-traditional commercial lender is the best option.

   4. When a business requires a loan for expansion purposes, it is necessary to convince the lender that they should invest money on the business. This is difficult if profits from the business are not very encouraging. Lenders need to make loan decisions based on the borrower's ability to generate cash and repay the loan along with the interest. The key is to emphasize the achievements of the business. In case the business has lost money, it is necessary to know why there has been a loss and what steps are being taken to rectify mistakes. Lenders look for a number of factors like business plan, leverage ratio and growth rate of the company.

   5. Sometimes, borrowers do not have sufficient collateral. It could be that the lender does not have sufficient knowledge of the value of equipment or machinery. In any case, lenders rarely lend the exact dollar for dollar amount against collateral. Even when they are convinced of the value, lenders have to follow rules pertaining to loan-to-collateral ratios.

Commercial Bridging Loans

The effects of global recession have largely passed out but it has left behind a few devastating fallouts for sure. One such fallout is lack of liquidity. Business houses are gaining grounds consistently but many are not yet healthy enough to go on a capital splurge. In such times, when a proprietor or an entrepreneur sets his glance at a property, he looks forward to commercial bridging loans to buy them. These are a great boon for people who are on the lookout for ready cash to buy property.

We know that real estate transactions are not smooth and "to the minute" tasks. Sometimes, one has to buy off a property even before he gets to sell his old one. In such cases, if he lacks liquidity or investment capital he has to shelve his plans for a later day. This might result in manufacturing problems, logistic problems and general infrastructure issues. Anyone would agree that it is not the best climate for conducting business. This is where commercial bridging loans come into the equation.

Let us take the three terms separately. They are called "commercial" because such loans are only meted out for buying commercial properties. "Loans" is a self-explanatory term. Now, let us come to the important word "bridging". This term is being used because such funds help in bridging the time lag between the sale of an old property and purchase of a new one. This loan becomes the connecting dot and makes a purchase possible. For the uninitiated, commercial bridging loans are short term secured loans.

Like it is with every other secured loan, you have to place a collateral for fetching such loans. Of course, by default, the property you are taking loan for becomes a ready collateral. Quite the contrary, you can alro pledge some other property if you think it to be a fairer option.

Now, let us come to a rare point about this loan. While it has been established that it is intended to be a bridge, a short-term loan (repayment period of 1 year), you can also use it for a pretty long time. In fact, it can be utilized up till a period of 25 years. Now for the rare part- a borrower does not need to pay a monthly mortgage for such loans, all you are required to fend off is monthly interest.

The lenders expect you to keep paying the interest and settle the loan amount by selling off the current property or other existing property on a later date. In general, you can avail an amount of £1,00,000 from this loan in UK. The rate of interest charged on such loans is a little stiffer than on an average loan but then it is open to negotiation too. If you have a nice credit history and have built your reputation as a good businessman, you can obviously fetch the commercial bridging loans at a cheaper rate of interest. There are many lenders in the market and it is best to shop around till yot find the one that best meets your requirements.

A Checklist for Getting a Business Loan

Financing a new business can be frustrating for an entrepreneur, but when you finally get that business off the ground the sense of accomplishment is worth it. There are several potential sources of funding a small business owner can gain access to, but one of the more common approaches is to seek out a business loan.

There is a process to getting a small business loan that requires a significant amount of preliminary work. A business owner should have his own checklist to refer to in making sure that he has everything he needs to apply for a small business loan.

Business Plan

The business plan is the business owner's way of selling his business to lenders. It includes sales and marketing plans, a list of key personnel, an estimate of costs, a projection of revenue and an estimate on how much the business will need to borrow.


A lender is not going to consider your loan application if you are not willing to share your company's financial reports. A lender will want to see your accounts payable, accounts receivable and your expenses. Your projections are found in your business plan. This information is your company's actual performance. The lender will want to see verified growth in revenue from year to year before investing in your company.

Loan Application

You can get the loan application from the bank itself or off the bank's website. Fill out as much as you can and have it ready to submit to the bank officer at your meeting. If you come across sections you are unsure of then contact the bank prior to your meeting to find out how to complete the application.

Product Model

If you are applying for financing for a start-up, then have a working model of your product to show the lender. If you are looking for funds to launch a new product, then have a model of that product and your other products to show. If you are a service company, then bring your marketing materials so that the lender can understand what your service is and how you sell it.

The proactive business owner enters into a loan meeting with a lender prepared to make his case. He has all of the important paperwork filled out and brings all of the materials he needs to convince the lender that the investment is justified. The more professional your presentation is, the more impressed the lender will be.

Commercial Loans - Information And Advice

Loans are very important in today's economic world. People can get confused between what a commercial loan is and what a personal loan is, they are two different things. A commercial loan has a much more in-depth application process and the requirements are much more rigorous when compared to a personal loan.

Applying for a loan can get complicated and can take long time for the process to complete. When trying to get a commercial loan, important factors are taken into consideration for example credit history, credit score, and more depending on the lender.

Depending on what you want to borrow the money will affect the amount of paper work the lender has to complete therefore increasing the process time. A great way of finding a commercial loan is using a commercial loan broker who can simplify the process for you.

Always shop around to see who can offer the best deal, never jump into a decision straight away, always do some research. Your broker, if you use one, will have to submit a letter of intent to any possible lender to get the loan process up and running.

In the letter of intent this will contain the details of the loan. For example the interest rate and how the long the loan will be paid back for. All commercial loans have their advantages and also their disadvantages, these will depend on the nature or the loan.

You can get two types of loans, the unsecured and secured type. An unsecured loan is a great option for those with a low credit rating and this means that not collateral is taking into account as a deposit. The only problem is the interest rates associated with this type of lending is the interest rate, which can be quite substantial.

The main reason for such high interest rates is because the lender is offering money without the security of a property as collateral. This situation can arise if you default on your payments. The secured option is where the loan is secured against collateral, your home or business for example.

This way the lender reduces the amount of risk that can be involved with an unsecured loan. The interest rate will be substantially less with secured loan lending. Most contracts associated with these loans can be very flexible. This means the length of the term and monthly payments could be suited to your needs.
About this Author

Find more information and detailed commercial loan advice at Commercial Loans [] or visit Financial Loans for in depth advice covering a range of subjects.

How to Find the Best Small Business Loan

If you own a small business, you probably know that funds for business purposes are one of the vital things you should have. Small business loan is very important for without extra money, you will be hurting to get your business off the ground or continue at the level that you want to reach. It is then important to be sure you know how to get business funds and ensure that the finance for business expenses is something that you will have really handy. A small business loan can be a great way for small businesses to get the cash coverage that they need.

There are several venues where one can find small business loans where you can obtain the funds for the business expenses that you require. One of the best places start looking for is to go to bank or credit union in your local area. They are known to offering the lowest interest rates. But if your credit score is low, then this option may not be suitable for you. You may want to look elsewhere to find the loan that suits you best. You have to ensure that you tale all of these things into consideration in order for you to get the best rate.

Aside from approaching banks or credit unions, you can also get business funds from an investor. Although they can't give you the best rate of interest for the business loan, they are generally better at lending to borrowers that may not have high credit rating. This is one of the options that you want to check into in order for you to get cash your business needs in the shortest time possible.

As a business owner, it is very important that you know how to get a loan that works best for you and your needs. There are many ways to get a loan or financing such as restaurant financing for people running a restaurant. But regardless of the type of loan that you want to get, you have to ensure that you find one that offers you the best interest rate and the terms of the loan. You may also want to ensure that you get the finances when you need them that you don't have to sit and wait for them to be given to you.

So before finding a small business loan, you must locate the best lender first. The best lender gives you financing options and can offer flexible rates.

Compare Business Loans For The Best Deal

It is important to compare business loans in order to ensure that you get the best financial assistance for your enterprise. A lot of entrepreneurs are starting their own enterprise and they require finance for setting up their business.

Websites Offer Details about Major Financiers

There are many banks and financing companies which offer business loans to entrepreneurs at reasonable rates of interest. The internet is a good place to search for the best financier as there are websites which compare business loans offered by different loan providers. Such websites make it easier for the entrepreneur to decide who is the best loan provider who offers loans at reasonable rates and does not have very rigid terms and conditions. If you are looking for financial support for your business, then, it is advisable to check out such sites thoroughly to find the best loan provider.

The greatest advantage of these websites is that the entrepreneur can check out details of various financing companies on the same website and there is no need to search different websites to find the information. You simply have to click on a particular financier and immediately the website will display all details about it. These websites compile important information about different financiers so that entrepreneurs can conveniently check out the details of each loan provider and compare business loans offered by them. If you want specific information about a particular one, you can type the name of the Finance company in the search bar provided and instantly the website will provide all the information available about the company.

To avail this service, you will be required to register with the site as a member by giving basic details like your name and email id. Also, the service is completely free and entrepreneurs are not required to pay any fee for the information. Generally, the website gets its payment from major loan providers whose name and details are displayed on the site. Those entrepreneurs who have a previous record of bad credit can also search the website for suitable loan providers for their enterprise.

Clarify All Doubts

By providing details about different loan providers, the website makes it convenient for entrepreneurs to compare business loans on the basis of terms and conditions, time period and rate of interest for the loan. Based on the information, a businessman can decide on the best loan provider for his enterprise. If you desire any additional information about a particular financier such as the amount of Money that they specify as interest, then, you can contact the website by phone or email to get the necessary information.

These websites also provide adequate contact details of each loan provider so that the entrepreneur can contact the company directly before making the final choice. Ideally, after short listing the most suitable financiers, you should also contact the loan company to clarify any doubts about their rate of interest and repayment conditions. This is essential before you sign an agreement with the financier for the stipulated loan amount.

It is important to check out websites which compare business loans. This will help an entrepreneur decide on the best loan provider without much waste of time and energy.
About this Author

Check out websites which Compare Business Loans and decide on the most suitable Business Loans provider who offers reasonable interest rates and convenient terms of repayment.