Commercial Lending Tips
When you own a small business, there are many ways you can secure money to grow it. For example, you can get a small business loan or line of credit to get cash quickly when you need it. Or, you can get a loan to invest in real estate. Or you may just need a credit card for occasional purchases. Work with your creditors to get the best possible credit terms.
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Pricing
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Your loan officer calculates the price of your loan. In your own mind, you can also think about the cost of getting a commercial loan. In the short term, you pay fees and costs to get a loan. Over time, you will pay interest on your loan. If you have a long history as a client of a commercial bank, use that to obtain the best loan pricing. A customer relationship manager should consider the other types of accounts you have at the bank before packaging your loan terms. You might be offered a better interest rate on the loan if you agree to apply for a commercial credit card. Work with your relationship manager to find the best package of banking services. Sometimes it also pays to switch all of your accounts over to a new bank with a solid business banking package.
Wait for the Right Time
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It's important to wait for the right time to borrow from a bank or credit union. When you build your company over time, your business gets financially stronger. A lender will assume a lower risk by lending to an established business than to a start-up business. Waiting until the right time also means you can get better loan terms. Show a lending officer the required business financial records and explain why your business is a good risk.
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Beware Prepayment Penalties
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A commercial loan is just like a home loan or another consumer loan. It could include a prepayment penalty. If your business suddenly gets a lot of cash on-hand, you may be tempted to make larger payments towards your commercial loan or pay it off altogether. If the economy changes, the bank may lose money by reinvesting your funds at lower rates. Compare different loan packages among banks and agree to a prepayment penalty you can live with.
Commercial Real Estate Loan
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Choose a realistic offering price to offer a seller for a piece of commercial real estate. This is important because the lender is going to conduct its own appraisal. If you want to take advantage of a buyer's market, you still shouldn't expect that the seller will sacrifice too much by cutting the price. It's more important to negotiate a fair price for a property that will help you grow your business.
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References
- Photo Credit sign. loan sale image by L. Shat from Fotolia.com
