Getting finance for your business can be quite a tricky situation with lots of hoops to jump through and credit searches. It is also a dilemma for a lot of people on whether they actually want to go down the financing route or not depending on what they need the money for and whether it is a short term issue or investment in the company. Before getting to the finance stage where commercial real estate loans are part of the potential solution, there are many things that should be taken into account in advance.
Commercial real estate lending services will offer a number of repayment options which will include different rates. Generally, the lower risk you are as a company or individual, the better repayment rate you will receive. This also includes the length of the period you take the loan over. The shorter the period of time you take it over normally means that there is a lower rate. It is important to think about this properly as if you are too keen to pay this back quickly and set intense payment terms. Defaulting can cause you financial difficulties and actually affect your credit credibility to get finance in the future. If you want to look at an example of repayment terms, take a look at the commercial real estate lending company Avana Capital who list everything you need to know about their loans on their website.
Return for Money
If you are investing in your company, then you clearly want to see a return for your money. It is important to know what you are going to get for your money. This may be in line with a project plan or similar where there is a clear detailed charter as to what the money will be spent on and how this will be recovered and grow your business. This should also include all the risks associated with this. You may, however, just need the money to keep afloat as you could be going through a specifically difficult period in the company and need the boost as to how to recover. If this is the case, then the company providing the real estate loan will need some convincing as to how you will be able to repay it back and may, in fact, offer you the loan at a higher rate.
If you have a loan, then effectively this is a debt which you will be paying interest on. If you manage to grow the company quicker or you get more funds in the account than expected, then it may be a consideration to actually pay back the loan a lot quicker than you wanted to save on interest payments. If you want to do this, then before taking out the financial agreement check to see if there are penalties or charges to do this. Sometimes there are early repayment charges in the small print that can actually be pretty expensive. Sometimes these are negotiable so have a chat with the lender in advance to see what terms are available.
If you are thinking about taking out finance for commercial real estate, make sure to consider everything that we have discussed.