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A loan application these days is incomplete without a visit to a commercial loan calculator website. Starting a business and upgrading a business in Canada is getting tougher each day, making commercial funding commonplace. Of course, getting good funding is always challenging, but using commercial mortgage calculators makes it easier.

This article covers all that the average Canadian merchant needs to know about commercial loan calculators. It also provides information on the important things merchants need to know regarding commercial mortgages.

What Is a Commercial Loan/Commercial Mortgage?

A commercial loan (or commercial mortgage) is a loan that’s secured using a business property. This loan is used to develop a business by purchasing new land, developing land, or renovating business premises. So, restaurants, industries, shopping centers, and many other businesses in Canada acquire commercial loans from time to time.

Commercial mortgages are similar to traditional mortgages in the sense that the borrowed funds are bound to property. Instead of purchasing their dream homes, Canadians take this mortgage to secure their dream business spaces. Some business owners have also depended on commercial mortgages to start a business.

Nonetheless, acquiring commercial loans is never easy, making many people consider them harder to obtain than residential loans. Besides the many requirements for acquiring commercial loans, many startups are unaware of the amount their business needs. Sometimes, they might also acquire loans that they won’t be able to pay back or loans that are not enough.

This has made these loan calculators necessary, as they make acquiring commercial loans more straightforward.

What Is a Commercial Loan Calculator?

Commercial loan calculators are tools that allow SMBs to calculate how much in loans they can handle. With this tool, you can calculate how much will be enough for your business based on the sales that you make.

When you use these calculators, they’ll provide a payment schedule for your business. This can help you to plan better for when you eventually take the loan.

How to Use a Commercial Loan Calculator

Using these calculators is not tedious, as you only need to provide a little information. Once you’ve provided that information, this tool will handle the rest. You can follow the steps below to use a commercial mortgage calculator:

  1. Visit a trustworthy commercial mortgage calculator platform.
  2. Input the loan amount that you wish to collect, your preferred interest for the loan, and the loan period.
  3. Some commercial real estate loan calculator platforms may also require you to provide your preferred amortization schedule.
  4. Other sites may also require down payment information, such as the cost of the already-owned property and its annual appreciation rate.
  5. After inputting the required information, click ‘Calculate’. The calculator software will process your data and offer you the best monthly payments and interest rates for your loan. You might also see a balloon rate overview comprising the balloon payment, property value during balloon payment, etc.
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Why Should You Use a Commercial Loan Calculator?

The first thing that most Canadian traders do when seeing that they require a loan is to use a loan calculator. There are many reasons for this, and they’ll all be discussed below:

Loan Calculations Become Easier

Regardless if you used a commercial loan payment calculator or not, you’ll be able to calculate your loan principal and interest. The only thing that you’ll need is adequate knowledge of the finance sector. Of course, you can also hire real estate experts for this, too.

Conversely, using a commercial loan calculator is much easier than performing calculations. It doesn’t require any high financial knowledge; just some basic data will do. Using such a calculator can also save merchants on the costs of hiring experts for this.

Loan Calculations Become More Accurate

Many real estate experts prefer using commercial mortgage calculators to performing manual calculations. Apart from the ease of calculation, the other reason for this is accuracy. The accuracy of these tools cannot be compared to manual calculations, where human nature can cause errors.

It Shows the Impact of Payments

Using a commercial property loan calculator gives merchants an idea of how their payments will affect a loan. Since the values of the loan calculators can be easily adjusted, traders can use them to discover how interest affects them.

They can also discover the effects of an increase or decrease in down payments, loan periods, and other values.

This gives a feel of what the loan will be like. With such information, business owners can figure out which loans are best for them and which they should avoid. This will allow them to avoid the mistakes that most merchants have because of ignorance.

Choosing Loan Lenders Becomes Easy

When you use a commercial loan payment calculator, you’ll see your loan payment, interest rates, and other useful information. Such information can help you narrow down your choice of lenders, allowing you to choose the best company for your needs.

Sometimes, these loan calculators are hosted on the sites of lenders. So, you can use the information that they provide to determine if that lending platform is a good choice.

You can also use the fact that you used a lender’s loan calculator to build better relationships with them. This makes it possible to acquire good funds with acceptable rates from lenders like banks.

Effects of Amortization Are Visible

Amortization determines the amount business owners will pay back as principal and interest on their loans. When you use a commercial loan calculator, you’ll be able to see what amortization does to your commercial mortgage.

This can help new business owners who are unaware of the effects of having a longer amortization year. With such information, they can be able to prevent long amortization years or prepare better for them.

What Are the Main Reasons for Acquiring Commercial Mortgage?

No business owner would like to be indebted to any lender; unfortunately, some loans cannot be avoided. Below are some of the reasons why business owners resort to commercial mortgages:

To Purchase Commercial Property

This is the most popular reason Canadian business owners acquire commercial loans. Every business owner would like to own their business premises,  as it’s a natural course during expansions.

Owning a commercial premise also looks more professional for growing businesses. So, many merchants prefer owning their premises to continuing under rented space.

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To Develop a Business

Not all Canadian business owners turn to commercial mortgages when they want to build business premises. Some people decide on commercial mortgages when they wish to develop their businesses.

Such individuals seek this mortgage to buy new business equipment, pay their staff, or fund some business expansion plans. Most commercial loans are not strict on their usage, so many business owners use them to develop their businesses.

To Acquire Commercial Premises for Lease

Becoming a landlord is one of the easiest ways to make more money in the 21st century. Business owners understand this too, so there’s no lack of merchants who wish to become landlords.

However, owning commercial business premises is never cheap, and as such, these merchants have no choice but to seek loans. With these loans, they can become landlords of commercial buildings, which they can lease out to other business owners.

To Obtain Land Development Investments

Land development projects have always been profitable since ancient times, making real estate one of the oldest industries out there.

Purchasing land and developing it for commercial purposes is a huge investment for any merchant. Most times, however, these merchants cannot fund these investments on their own, so loans are needed.

So, many merchants choose to take commercial loans to fund their investments in land development projects. Since the period of commercial loans can take years, there’s enough time for merchants to realize profits from the investment.

Payment Structure for Commercial Loans

Not all merchants can make sense of the figures that they get after using a commercial loan calculator. As such, this section is going to discuss the payment structure of commercial loans.

Compared to residential loans, commercial loans do not come with a long payback period. The tenure for residential loans can be as long as 30 years.

However, commercial loans are usually short, like 2 years, 3 years, or  5 years. Of course, when a mega-corporation takes out loans, the payment period can be 30 years or even 40 years.

Merchants who are used to residential mortgages may be unaware that things are different regarding commercial financing. Unlike the traditional amortization schedule that most people are used to, commercial mortgages involve balloon payments.

Simply put, a balloon payment is a lump sum of money paid down the line during a loan period.

So, merchants can enjoy interest-only payments when traditional homeowners pay interest and principal after a specified period.

Interest-only payments are a form of loan payment where only interest is paid during the loan period. These interest-only payments are usually fixed during the early periods of the loan, with a balloon payment coming later.

Merchants favour this payment method as it leaves their businesses with enough capital to grow. This will also make it easy to pay back the loan down the line.

Some lenders allow traders to make interest-only payments for the entire period of the loan. After the loan period ends, the balloon payment will then cover everything. While this gives the business ample time to grow, such huge balloon payments can be disastrous for unprepared merchants.

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What Do Balloon Payments Entail?

In this section, we’ll be covering an essential section of the commercial loan calculator called the balloon payment. In the section above, we covered that balloon payments are lump payments made during the loan period.

Of course, this payment can also be pushed to the end of the loan period. Generally, the period during which a balloon payment comes isn’t fixed. It’s all dependent on the agreement that the merchant had with the lender.

The name ‘balloon’ comes from how blown up these payments can be compared to regular loan repayments. So, you could be paying $15,000 monthly for a loan before a balloon payment of $2,000,000 appears. Nonetheless, balloon payments are usually common with commercial loans.

When a balloon payment is involved in a loan, the loan is usually repaid interest-free for a short period. After these short periods, a balloon payment comes in. The balloon payment can also come in at the end of the loan.

So, if a Canadian merchant takes a commercial loan for 20 years, they can enjoy 5 years of interest-free payments. After 5 years, a balloon payment can come in before the merchant continues with interest-free payments for another 5 years. That’s how the repayment will be made before the loan period ends and the loan is repaid.

What Happens When a Balloon Payment Is Due?

Balloon payments are inevitable with a commercial mortgage, and only 3 scenarios can occur whenever they come up:

Pay the Balloon Payment

Naturally, this is the ideal situation for every merchant. When this huge payment comes up, the merchant is expected to pay up.

After which, they can continue with their interest-low or interest-free payments. When the balloon payment only comes at the end of the loan period, then the loan will be considered repaid.

Refinance the Loan

This is a situation that many merchants hope to avoid, hence why many invest in commercial loan payment calculators. Refinancing occurs when they’re unable to repay the loan. Here, business owners meet with lenders to talk about a new loan agreement.

You can look at it as taking out a new loan to pay back the old loan. Of course, the new loan terms will be more favourable to enable them to repay the old loan. After this, the merchant can focus on the new loan and forget the old one.

Sell Property and Pay the Balloon Payment

This is another unpleasant scenario that could occur when the balloon payment is due. Here, the merchant doesn’t talk about new loan terms; rather, they’ll sell off assets to pay the balloon payment.

No one wants to be stuck with this option as it requires losing some of the business capital or personal assets. Even though it’s extreme, many Canadian business owners will prefer this than to default on the balloon payment.

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What Happens When a Merchant Fails to Make a Balloon Payment?

Failure to make a balloon payment is a situation that no Canadian business owner hopes to encounter. First, such a situation would be disastrous for the merchant’s credit score. It would also badly affect the merchant’s credit history, making it almost impossible to get loans in the future.

In most cases, the lender will demand the entire loan when a trader defaults on a balloon payment. Banks will expect all outstanding fees to be paid immediately, or they’ll go for foreclosure.

Common Indexes Used for Commercial Loans

Besides balloon payments, another factor to consider before visiting a commercial loan payment calculator platform is popular indexes. An index is an indicator of changes in market securities. These indexes are some of the biggest determinants of the interest rates of lenders.

Many lenders tie their interest rates to these indexes, so changes in their interest rates are partly determined by these indexes. So, if you can monitor these indexes, you can find the best time to visit lenders for financing. Many indexes are used by commercial loan lenders, and they include:

United States (US) Treasury Bonds

US treasury bonds are an important aspect of the finance market, as they set the limit for real estate loan charges. Among the many treasury notes, the 10-year treasury note is a big determinant of loan rates. The performance of the commercial and residential real estate markets is all dependent on the yields of the 10-year Treasury note.

The 10-year Treasury note is particularly respected for the backing and security that it receives from the US government. This makes it more secure compared to most of the high-corporate bonds.

Swap Spreads

Unlike other interest rate determinants on the list, swap spreads calculate the likelihood of an increase in interest. The swap spread is determined by the difference between government bond yields and swap rates.

London Inter-Bank Offered Rate (LIBOR)

LIBOR is popular worldwide as one of the most used indexes for interest rates. This rate is used by London banks that offer short-term loans to other banks.

The reason for the worldwide usage of LIBOR isn’t based on this, though. It’s because the rate that LIBOR stipulates is based on estimates that are seen by global banks.

Prime Rate

This interest rate is the average rate of interest offered in the interbank market. The prime rate is usually offered to the most trustworthy of borrowers, and its value is dependent on market conditions. This is different from LIBOR, where rates are based on estimates from global banks.

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Sources of Commercial Loans

After using the commercial property loan calculator, traders will naturally look for where they can get a loan. Besides banks, there are many institutions out there that offer commercial mortgages. Here, we’ll be discussing the different categories of commercial loan companies.

Conventional Commercial Mortgage

These are business loans that come from banks, credit unions, and other enterprises backed by the Federal Deposit Insurance Corporation (FDIC). The funding that comes from such institutions is normally used for investment in property and on owner-occupied premises.

Investment property loans are usually for business owners who want to acquire property and lease them out.

Such loans are much easier to acquire than owner-occupied business loans, where you have to occupy 51% of the property. Most of the merchants who use commercial real estate loan calculators usually go for this loan source.

Acquiring loans from these types of institutions requires a personal guarantee, which usually involves checks on the business’s capability. The lender will also check the merchant’s and the business’s income tax returns and their global cash flow during the underwriting.

Unlike the other loans in this category, conventional commercial mortgages don’t come with government backing. This mortgage is an agreement between the merchant and the bank. This gives them the advantage of being able to decide the maximum cap for their loans.

Small Business Administration (SBA) Loans

The Small Business Administration is a federal agency that helps businesses in securing loans. As a government-backed funding source, every qualified applicant is certain to get a loan. Although SBA loans come with lower interest rates, their qualification criteria are still strict.

The SBA reduces the risk that comes with accessing a loan, making it easy for all businesses to acquire capital. Of course, this institution is not a direct lender; rather, it offers assistance through community development institutions and micro-lending bodies.

Normally, these institutions wouldn’t grant high-risk merchants funding with low-interest rates. However, they trust that loans offered to SBA-approved businesses will be repaid eventually. So, you can consider this loan source when you’re done with the commercial property loan calculator.

SBA loans are available in two categories:

  • SBA 7(A) loans
  • SBA 504 loans

SBA 7(A) Loans

This is another source of funding for owner-occupied businesses. So, if your business occupies more than 50% of a property, it’s eligible for this loan. Like most government funding, a credit score of at least 680 is also necessary.

If the funding that a merchant seeks is $150,000, the SBA 7(a) funds can guarantee 85% of that loan. If it’s higher than that, this funding scheme can also offer up to 75% of the loan. The remaining 15% or 25% of the loan is covered by the business owner’s down payments.

So, business owners of large businesses can acquire up to $5 million in SBA 7(a) funding. The interest for this type of funding usually ranges from 5 to 8.5%.

SBA 7(a) loans are usually paid using variable-rate mortgages or fixed-rate mortgages. Sometimes, merchants use a combination of the two mortgage types. The maximum rate of this funding depends on the prime rate, and loan periods can go up to 25 years.

This type of funding works best for merchants who wish to renovate an old office building or build a new one. Besides this basic usage, other ways of using SBA 7(a) loans include:

  • Funding inventories for businesses
  • Establishing a new business
  • Acquiring equipment for a business
  • Expanding a business
  • Refinancing an existing debt in the business
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SBA 504 Loans

This is another loan that’s targeted toward merchants that already occupy and utilize more than 50% of their property. Unlike other owner-occupied business fundings, SBA 504 loans are two loans joined together:

  • A Community Development Company (CDC) that’ll provide 40% of the loan
  • Banks that’ll provide up to 50% of the loan

The remaining 10% of the loan will come from the business owner’s down payment. SBA 504 funding comes with no cap, so merchants can borrow as much as they can repay. Their payment structure is a fully amortized payment schedule that can go up to 20 years.

Since SBA 504 loans are government-backed loans, borrowers need to have a credit score of at least 680. They’ll also need to satisfy the qualification criteria of the CDC-like meeting their job-creating goals.

The interest rates, loan period, and other fees for this funding are a combination of the lending company’s and the CDC’s terms.

Although the government doesn’t control the terms offered by the lending company, they do control the terms offered by the CDC. CDC funding for 10-year loans comes with an interest of 4.85%, while 20-year loans come with an interest of 5.07%.

This SBA funding was designed to encourage local community employment and development. So, businesses that qualify for this funding are required to create (or retain) one job for every $65,000 they borrow. If the commercial loan payment calculator shows that you don’t have much for a down payment, you can consider this loan.

There are many ways to use SBA 504 funding, and some of them include the following:

  • Purchasing buildings
  • Purchasing Land
  • Acquiring new equipment
  • Developing land
  • Upgrading existing buildings and facilities
  • Refinancing existing debts that came in during the business expansion process

Commercial Mortgage Backed Security (CMBS) or Conduit Loans

This type of merchant loan is usually backed by a first-position mortgage and comes together with a set of other mortgages.

These mortgages are then sold off to investors after being placed in a Real Estate Mortgage Investment Conduit (REMIC). Although this loan carries considerable risk, many investors are attracted to it because of the considerable rewards.

Commercial lenders and real estate investors can also acquire liquidity from conduit loans. This loan can come with interest-only payments or a fixed interest rate. In the end, the merchant will still make a balloon payment.

CMBS loans are usually packaged by investment banks, commercial banks, and conduit lenders. This loan is mostly used for buildings such as hotels, shopping malls, warehouses, offices, and retail buildings.

Hard Money Loans

Commercial loans do not have a strict approval rate. However, businesses with a history of short sales on loans or foreclosures will find it hard to acquire them. In such situations, these businesses can only consider hard money loans.

Hard money loans do not come with steep requirements. If there is sufficient equity in the collateral for a loan, these private lenders will easily grant the loan. Even though they’ll check a business’s credit, their approval isn’t based on creditworthiness.

Unlike other loans that come with long repayment periods, hard money funding is a strictly short-term loan. So, the loan period is usually within 12 months, with a maximum of 2 years. This is the best type of loan for merchants who require short-term funding for their businesses.

While hard money loans offer pleasing requirements for acquiring a loan, their repayments are steep. They can demand a 10% interest on their loan or even higher than that. This loan will suit the requirements of merchants that use a commercial real estate loan calculator because of quick cash infusions.

Bridge Loans

Bridge loans are another financing opportunity for merchants that are rejected from acquiring commercial loans. This funding is also seen as a short-term loan since the loan period usually lasts from 1 to 3 years.

The ‘bridge’ in the name of this loan is because it bridges the gap between long-term loans and real estate loans. It’s not strictly a short-term loan, but it can’t be called a long-term loan either.

Most times, this funding is used to buy time for a merchant who’s in dire need of funds. It helps merchants refinance old loans or get more time to sell off their assets.

Compared to hard money loans, bridge loans offer longer loan periods and lower interest rates. So, you can easily find bridge loans that come with 6% interest rates.

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Guide to Qualify for a Commercial Loan

When a Canadian merchant gets favourable results from using a commercial loan calculator, the next step is to get a loan. However, many merchants are never able to get past this point, as their applications are always rejected. This usually happens because these merchants are unqualified for funding.

To qualify for a loan, the lender would have to appraise the merchant’s financial status. The commercial underwriters of the lending company would also evaluate the profile of the merchant’s business. Some lenders also extend this evaluation to companies that are partnered with the merchant.

The lenders will also check the merchant’s projected goals and see if the company’s earnings are keeping up with them. Simply put, many things go into getting approved for a commercial mortgage.

So, if you want to ace this strict process, you can use the guide below:

Get a High Business Credit Score

Business credit scores are one of the ways through which lenders ascertain the risk of giving out a loan. These scores would allow them to ascertain the down payment, interest rates, and other payment terms required for a loan.

So, high credit scores offer better chances of getting commercial mortgages approved. It will also improve the loans that a commercial loan calculator will show you.

The best business score for a business depends on the business credit classification the lender uses. There are three business credit classifications that lenders use, and they’re elaborated on below:

Experian Business Credit Score

This business credit scoring system goes from 0 to 100, where 0 represents the highest risk, and 100 is the lowest risk. Scores between 60 to 100 are also classified as medium to low risk. So, if a lender uses this classification system, a business requires a score of 80 for a higher chance of approval.

Fair Isaac Corporation Liquid Credit Small Business Scoring Service (FICO SBSS Score)

This scoring system goes from 0 to 300, with 0 representing the highest risk and 300 representing the lowest risk. When the small business administration uses this credit system, their lowest acceptable score is 140. Conversely, other lenders require a FICO SBSS score of 160.

Dun and Bradstreet PAYDEX Score

This business credit scoring system goes from 1 to 100. 100 is the highest possible number, representing the lowest risk, while 1 represents the highest risk.

Within this scoring system, scores from 80 to 100 are generally considered low risk. So, merchants with credit scores above 80 have the best chance of getting their funding approved.

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Get a Down Payment

All lenders require a down payment before issuing assistance to any business owner. This down payment is not fixed but usually differs according to lenders.

So, merchants need to be prepared to make huge down payments for the best chances of getting their mortgage approved. Making a huge down payment sends a strong message to lenders, showing them that the merchant is interested in the mortgage.

Get a High Personal Credit Score

Besides owning a high business credit score, some lenders might also require a high personal credit score. For personal credit scores, many commercial mortgage companies rely on FICO personal credit scores.

So, a high credit score needs to be above 680. For the best chances, however, a score of 700 or above is best. That way, the favourable report of your commercial loan calculator will become a reality.

Own More than Half of the Company’s Shares

This is a criterion that no lender would give up on. So, a merchant’s business needs to occupy at least 51% of their property before they can be considered for a mortgage. If the company doesn’t occupy this much space, then there’s a high chance of never getting a commercial mortgage.

The Company’s Age Should Be More than 2 Years

Commercial mortgages are approved when the borrower’s business has been operating for more than 2 years, at the very least. Acquiring a mortgage when the company has only been operating for two years is very difficult. Such companies can only acquire loans when paired with high business and personal credit scores.

Generally, most lenders would prefer if a company has been operating for much longer. For lenders, the longer the merchant’s company has been in business, the better.

Good Character

One of the things that commercial mortgage companies consider in a merchant is their character and their business practices.

These factors affect the overall trustworthiness of the borrower and how much of a risk they will be. So, you can get rejected because of character even when a commercial loan calculator shows that you’ve got favourable odds.

Besides the character of the trader, the character of whatever references they bring will also be considered. As such, merchants should only recommend references that are truthful individuals, people who can answer truthfully when the lender contacts them.

Meet Their Requirements

All commercial loans come with the stipulated requirements of the lending institution. Merchants that get rejected from acquiring some mortgages fail because they only fulfill little of the lender’s requirements.

Of course, fulfilling all the lender’s requirements wouldn’t guarantee the approval of a mortgage. However, it would increase the chances of it getting approved. Some of these requirements include the down payment, the business goals, and the ability to meet future balloon payments.

Offer Good Collateral

Lenders are always assured of the capability of the borrowers when the borrowers offer good collateral. Some of this collateral includes recreation vehicles (like yachts), real estate, account receivables, and business equipment.

The more collaterals that a merchant lists in their application, the higher their chances of getting their mortgage approved.

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Documents Needed for Getting Commercial Loans

Using a commercial loan payment calculator is good preparation for applying for a commercial mortgage; readying the required documentation is another. There are many proofs and personal documentation that every merchant provides before they can apply for loans.

Below is a list of the common documentation that accompanies commercial mortgage applications. This list is just a generalization, as some lenders might request additional documents before they approve their funding.

Personal Information

This is a requirement for any loan application, and commercial mortgages are no different. Some of the personal information that lenders require includes proof of address, social security cards, and valid driver’s licenses. Proof of citizenship might also be required for some government-backed funding.

When providing this personal information, merchants are required to offer the original certificates. Unless explicitly stated by the company, this is the only way to get funding approved fast.

Survey Documents

Many commercial mortgage companies require property survey documents before they fully process a loan application. These property surveys have to be conducted before closing. They also need to be signed and presented to the lender before the loan is processed.

Business Plan

Although this is not a requirement for all loan companies, many of them do request it. These companies would require merchants to present a business plan that will show the vision of their company. These business plans will also detail how the approval of the loan will help the company actualize that vision.

Business plans will need to show how the business owner will use the property that they are trying to acquire. They’ll also show the usage of that property will bring them significant profits.

Real Estate Documents

Merchants need to include the original real estate listing for their desired property in their loan application. Of course, original real estate listings will not be required for merchants that already own their property.

Other real estate documents that will be needed include the property dimensions and blueprints of the building. These documents are necessary when a merchant plans to build on an existing property.

Financial Records

All mortgage lenders will require some form of the financial records of the borrower’s company. This ensures that the financial history of the merchant’s company matches the information they provided on the credit application.

Although the required records differ for various lenders, the most common ones that lenders ask for include:

Some of the financial records required by lenders include:

  • W-9 or W-2 forms of the past 24 months
  • Business credit reports of the merchant and their associates
  • Self-employment tax documents
  • Bank records
  • Filed tax returns for the past 24 months
  • The current pay stubs of the merchant

Appraisal Reports

Business appraisal reports are not always requested by lenders at the onset of the application process. However, if the business has been appraised shortly before the application process, the lenders may request the appraisal report. This report is also required when the business owner is refinancing the property for the mortgage.

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Tips for Searching for a Good Commercial Loan

The efforts of the commercial real estate loan calculator will be put to waste when merchants acquire loans with unfavourable conditions.

As such, it’s good to do the proper research to acquire a loan with favourable conditions before applying for it. Normally, this would be a tiresome process, but following the tips below can make it easier.

Consider Different Commercial Loan Companies

As a rule of thumb, borrowers shouldn’t settle for the first loan company that they see. It’s always better to try various options and compare the terms from different lenders. This would allow the borrower to be able to see if some lenders offer better terms than others.

Contacting different commercial loan companies also has the effect of increasing the chances of approval. The requirements for most lenders are not always the same. So, there’s every chance that one lender will approve a loan request when others have rejected it.

Consider the Location of the Commercial Mortgage Company

Location is another important factor worth considering when merchants apply for mortgages. Although it might be tempting to acquire loans from out-of-town lenders, home lenders are the best. The best lending rates can only be found at local lenders.

Beware of Unbelievable Deals

There are scammers everywhere, and the business finance industry doesn’t lack them either. It’s easy to identify most scammers from the unbelievably cheap rates that they charge for their services. Such individuals have no intention of offering the merchants any loans; they just want their money.

Sometimes, these scammers also pose as high-class legitimate loan companies as they charge exorbitant fees. So, the best method to avoid them is to only patronize well-known banks, credit unions, and insurance companies.

Work with the Term Sheet

A lender will always present a term sheet to merchants that they want to work with. These term sheets are written declarations of interest that come with the terms of that lender. So, a merchant should never put their hopes on a lender, if they’ve not been issued a term sheet.

Use Your Deposit Relationship

All companies are always interested in more business deals, and banks are no different. So, traders can fight for better loan rates when they use that real estate bank as their main financial partner. The promise of transferring a business’s accounts to the bank will get them to offer better loan rates to the merchant.

Accept Appraisals Only from the Lender

Appraisals are never free, and not all lenders might require them, either. So, merchants should never allow anyone besides the lender to get them to pay for a business appraisal. Unless the lender’s term sheet offers favourable terms, a merchant should never accept to do an appraisal.

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Fees Associated with Commercial Loans

Besides what the commercial property loan calculator shows, many fees go into closing a commercial mortgage. Many lenders forget this fact, and they end up paying more than they budgeted for a loan. So, it’s always best to read the fine print and ascertain the hidden costs of accepting a loan.

However, most merchants are bad at this, so they just hire professionals, such as real estate brokers. These experts can figure out costs that aren’t written outright in loan documentation.

Below are some of the fees that merchants can expect in a commercial mortgage:

Appraisal Fees

Although appraisals aren’t always needed, they are still part of the commercial mortgage application process. Appraisals offer lots of information on a business, so they aren’t exactly cheap. They can cost as much as $10,000, with most large-scale commercial projects costing up to $25,000.

Survey Fees

Surveys are a necessary part of approving commercial loan applications. Surveys consider the parking lots, driveways, curbs, gutters, and other utilities of the borrower’s business. This report can cost up to $6000, with the price going up for each additional inspection that takes place.

Legal Fees

This fee is associated with what the merchant’s real estate agent charges for their services. If the merchant is purchasing a building, it also covers the seller’s attorney fees. Nonetheless, these legal fees are usually fleshed out before the real estate agent or merchant begins their work.

However, any unexpected situation that occurs before closing the loan can cause an increase in the agreed fees. Such extra fees could come from a title search, court filings, or research fees. Legal fees usually start from $500 and can go up to $2500.

Application Fees

Unlike some of the fees on this list, application fees are set and shouldn’t change when closing the loan. Of course, unforeseen circumstances can cause extra fees to be included in the loan documentation.

Adjustable Rate Loans

Merchants that are accepting loans from lenders with adjustable loan rates should prepare themselves for unexpected charges. The interest rate of such loans increases or decreases as the interest rate changes. Sometimes, these rate changes come with charges, so merchants should be prepared.

Commercial Loan Calculator Conclusion

There are many things to consider when deciding on a commercial loan, and this article covers all of them. This article also covers the best steps to apply for and qualify for the best loan rates. Commercial loan calculators are an important aspect of applying for a commercial mortgage, but they shouldn’t take the place of professional brokers.

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October 29, 2022
Fact Checked

FAQs about our Commercial Loan Calculator

Why should I use a commercial funding broker?

Typically, in order to save both time and money! When it comes to commercial and company financing, the variety of alternatives available might be overwhelming, and your local bank is not always the best choice. However good brokers are usually in a position to know very quickly what the best financial solution will be, who the best financial provider will be for them, and how they will be able to negotiate the best terms on their client’s behalf.

What specific information would be required from me for a commercial loan?

The answer to that question is going to rely heavily on the kind of financial assistance you need as well as the lender that you go with. If you want to acquire the finest loan conditions available, you will need to produce at least sufficient documentation of your income and copies of your bank statements, although these requirements are not always essential.

Do I need to have a spotless record on my credit report?

Certainly not in every case. You may work with lenders that, in contrast to many other residential mortgage funders, will consider both the causes for any problems that occurred in the past as well as your history since that time. In the event that no other viable options are available, there are still some “non-status” lenders.

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