Don’t Forget These 4 Key Considerations When Taking Out Commercial Loans

Sometimes the smallest details make the biggest difference. Make sure your company isn’t caught off guard by understanding the tiny details that make up a commercial loan.

The process of applying for and taking out a commercial loan can be one of the most time-consuming parts of your company’s ambitious real estate projects. Getting the right amount on reasonable terms is paramount, as failure to do so could upend the success of the entire investment. That’s why it’s so important to ask the right questions when meeting with a commercial lending professional.

Some pieces of information, like the hard number details about loan terms, are a no brainer. There are a few more key considerations that often get forgotten when large amounts of money are at stake. The following questions are helpful reminders to consider when taking out commercial loans to fund your company’s next real estate investment.

1. Are there any extra fees or costs attached to the loan? Be diligent in asking your lender after fees that might inflate the final cost of your loan. Expect lender fees, loan origination costs and appraisal fees, but don’t assume these are the only types of extra costs that a lender may see fit to add.

2. Is this a recourse or non-recourse loan? In a recourse loan, the borrower (your company) would be responsible for the paying back the full amount of the loan if it goes into default. This is in addition to the property being possessed by the lender. If you’re working with a non-recourse loan, your company is “off the hook” after the loan goes into default. However, the lender can still come after you to cover the loan if they can prove in court that your company was negligent in how it ran the project.

3. How easy would it be to refinance the loan? In an ideal world, your company will put enough thought and planning into its next real estate investment that there will be no need to refinance a loan for several years. That being said, we rarely live in the ideal world. That’s why it’s important to ask a lender about the possibility of refinancing the loan. Borrowers may need to pay a prepayment penalty if they wish to renegotiate their terms in response to a new developments.

4. Will you need to borrow more money down the road? It’s better to lock in all the capital you need at a rate your company can manage now rather than wait. The more you leave to chance, the more you expose your company to less favorable loan terms down the road. Better to invest for the future with a reasonable lender than be left scrambling for capital a few months later.

Doing Your Homework Before Reaching Out To Lenders Simplifies The Process
Examining all the details available is the first step toward a successful real estate investment. This goes double if your company is making its first foray into the industry.

A trusted private lender can answer all of the other questions you may have about acquiring commercial loans for your business.

Private lenders experienced with commercial real estate transactions are a valuable resource to our company. Count on these experts as you plan your next moves.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.