Office building loans are a specific type of commercial loan that are specifically for office buildings. Office building loans are generally financed through a commercial mortgage. This loan process can be confusing, time consuming, and frustrating. Office building loans are different from personal mortgages in a number of ways. One of the most significant differences is that it involves the financial history of the corporation or business. In some cases, the individual investors may have to submit their financial information as well. Regardless of the size of the property, the value of commercial real estate when compared to personal real estate is much higher.
Every good business needs available funds to operate. Banks and other lending institutions won’t just hand over money just because you ask. You need to show the bank that your business is solid and profitable. The bank will want to know how you will repay the loan, which means that you will need to have your financial records in order for the bank to review. Once the lender feels that your business is a good loan candidate, you can start working on the details of the loan.
There are several different types of loans to accommodate office building loans. One of the more traditional loan programs available is the Real Estate Purchase Loan. This loan uses the office building itself as collateral. It is available as a commercial and a governmental guaranteed loan. The rates on this loan are usually competitive and dependent on the loan to value of the building.
There are other types of commercial mortgages. You can apply for a fixed or amortized mortgage. You pay an equal amount each month, usually 15 to 25 years for commercial mortgages. At first, as much as 95% of each payment goes toward interest, but every month you pay a little more towards the principal until the loan is paid in full. A variable rate mortgage offers lower interest rates than fixed rate loans, but you are subject to fluctuating market conditions. Variable rates are riskier because you can not budget accurately for payments from month to month.
You might also want to consider an interest only mortgage or a mortgage with a balloon payment. “Interest only” simply refers to only making payments on the interest for the first three to five years of the office building loan. The goal is to reduce your monthly payments so that you can concentrate on improving your cash flow. The same is true of a mortgage with a balloon payment. This shorter term loan can range from 5 to 15 years. The smaller monthly payments allow you to use immediate cash flow to improve your business. The thing to remember here is that your business may not grow at the rate that you anticipate, but the balloon payment will definitely show up on time.
In addition to the traditional methods of office building financing, Bond financing is growing in popularity. There are only about a hundred lenders in the nation that specialize in this type of office building loan. Once the deal is approved, an attorney will write the bond. The bond is then sold to an investment banker. These bonds are typically sold to investors at a yield around the same amount as the 30-Day LIBOR.
It is important to review your credit score. Business credit is monitored through Dunn and Bradstreet and may be obtained directly from that organization. Doing your paper work is an important aspect of getting your office building loan.
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