In the world of real estate development, there are very few hard and fast rules. With commercial loan financing, there are number of areas that allow for borrowers and lenders alike to be able to craft the terms of such a loan to their own best interests.
Knowing how to properly negotiate a loan will not only save a borrower a tremendous amount of stress and angst, but it also has the potential to save a borrower quite a bit of money. Commercial loan financing is all about risk and reward. The first thing to keep in mind when dealing with potential lenders is that a borrower is the customer, but they must also be worth the time of the lender.
Lenders do not deal with borrowers who are not prepared and do not have clear goals, as well as a plan, in mind. Commercial loan financing is not a game for the unprepared or the irresponsible and a potential borrower will do well to understand that, while lenders want your business, they have little time for futility or disorganization. That being said, if you show yourself to be well prepared and ready to deal with the rigors of real estate investment, then lenders will welcome your business. If there is one thing that lenders love, it is a knowledgeable, easy borrower. It means less work for them and they are still able to claim their commission.
There are a number of points of negotiation that a borrower can hit upon with lenders that specialize in commercial loan financing. The first is the interest rate. This is especially true for borrowers that are very well qualified. Lenders will be especially keen to want your business if you have a high credit score and an excellent track record with loans. This gives you a tremendous amount of power to attempt to negotiate an interest rate that will work well for you and for your long-term business plan.
Another point of negotiation is the closing costs associated with the commercial loan financing. These are very commonly negotiated, as they are commonly not a part of the loan itself. They can amount to quite a bit of money, however, and it is usually taken directly out of the pocket of the borrower, rather rolled into the amount of the loan. A savvy borrower will be able to negotiate these fees down, or possibly eliminate them altogether. This same tactic also applies to other fees and costs that are associated with the processing of the loan. At the very least, a well-qualified borrower will be able to get all of the costs rolled into the amount of the overall loan.
What are some questions that a borrower could ask about commercial loan financing?
One key element of commercial loan financing is what happens if a borrower is able to pay off the loan ahead of time. If this is part of your plan, you will most definitely want to know the conditions under which you are able to do so. Many lenders have various penalties and fees that are associated with prepayment, but they are always up for negotiation. If you have a solid plan and truly believe that you are able to pay the commercial loan financing off early, then use those terms as a point of negotiation.
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.