Commercial Mortgage

Commercial loans and mortgages come in all shapes and sizes and are available for many different purposes.  Some are supported by government backing and insurance like the SBA 7a and SBA 504 programs along with HUD/FHA programs and Fannie Mae loans for multifamily.  Other commercial loans are offered by banks and yet others are offered by wealthy individuals or family trusts.

Commercial loans work kind of like a puzzle.  Once all the pieces are in place it makes sense, but until that time you can’t really make out what the picture will look like.  These loans usually are not as cut and dry like a residential loan.  With residential loans there are steadfast guidelines, however with commercial loans the underwriting process follows a less linear path where underwriters attempt to decipher whether the transaction makes sense.  So how do lenders determine what makes sense?

 Basically there are three components to the analysis:

 1.  Does the borrower have ‘skin’ in the game? In other words, is the borrower putting any of their own money in the deal?  This is very important.

2,  Does the venture make money?  About the only type of commercial loan that is not concerned with the money making component of the transaction is a land/lot loan and they mitigate their risk in other ways.

3.  What is the Cap Rate?  The ‘cap rate’ or capitalization rate is a factor that is applied to the NOI (Net Operating Income) to determine the value of the property.  Essentially the cap rate reflects the return that can expected from the investment.

 All this may sound confusing, especially when you hear the other terms that are bandied about, like DSCR, ROI, LTV/LTC, lease hold and GRM.  Don’t be overwhelmed by it all. 

 There is a loan that is right for you business need and with a good plan and some patience you can buy that apartment or office/warehouse.  You can start that ground up business, buy a franchise and finance it with an SBA loan and even get equipment leasing.

 You must take the first step and it’s easy with Mortgage Answer Guy (dot)Com.  If you have questions, that’s what we are here for, we’ve got answers.  Browse our Category section on the home page.  Just click on the Category ‘drop-down’ menu and pick the category that might answer your question or ask us a questions directly by going to:

 http://MortgageAnswerGuy.com and click on Ask?

 Thanks, we look forward to helping.

 Sincerely,

The Mortgage Answer Guy