Avoiding foreclosure on a commercial loan is a bit different than it’s residential counter part. Whereas a residential loan has the best option of being a short sale, the commercial lender doesn’t see this roll up of debt as a good thing. In fact, they may choose to foreclose simply because the sales forecast is weak. In order to understand how to avoid commercial foreclosure you need to understand the commercial lending business.
A bit of a disclaimer: As with any of our posts, we are looking at this from the angle of Atlanta Real Estate and not another city. You should always check with your state and local vendors to have the most up to date information, whether that be Detroit Real Estate or Minneapolis Real Estate.
Commercial Lending Failures
Commercial lending as we know it is the process of a financial institution offering a certain dollar amount of a a loan to a business. Many times the business is decently sized with a large number of employees and perhaps multiple locations. There are many factors which go into the commercial lending process, but today we’ll be looking at the five “C’s” of commercial lending will ultimately cause failure if not addressed properly in a timely and efficient fashion. Read on to learn why you should avoid these failure-inducing practices and avoid commercial foreclosure at the same time.
Character can be one of the best ways to determine if a commercial loan is suitable for a large scale business. This involves everything from examining the company’s stake in their industry, to customer response, to branding, to future growth assessments, and more. It all boils down to character and if you’re a financial institution and you not feeling “good vibes” from the company you’re going to commercially lend to, you should reconsider to avoid a huge mess later on down the road.
Capacity is simply the ability to repay the debt accrued over time from the commercial lender. If the company you’re lending to has a shaky, unstable history of repaying debts, you may want to further examine the situation to fully comprehend just what went wrong. There are so many factors involved, and for this reason it’s always a good idea to have a second glance at the extenuating circumstances.
This is a major factor in not only obtaining the loan but also keeping the loan.
If the company being lended the funds decides to put up a large amount of initial capital to offset the loan partially and reduce risk, it’s an extremely favorable gesture to convince the commercial lender the company has strong intentions of paying the loan back. With commercial lending foreclosures, there are many groups who put the bare minimum down without having to pay commercial lending insurance to secure the loan. This can come across as a less than desirable trait and should be looked into if you plan on proceeding with the commercial lending process.
Collateral for a commercial loan can work wonders to help speed the process along and provides a great vehicle of security for the lending institution. The company itself can put up shares of their business as collateral or an existing building they’ve already bought and paid for. It’s completely up to them and nearly anything will do. The more collateral the better in most cases, at least from the lender’s point of view.
There are many conditions involved in the commercial lending process with everything varying from the interest rate, to the duration of the loan, and to what the ultimate purpose of the loan is. These factors, and more, can place great influence on the commercial lending final decision. It’s vital to have all of these factors squared away before anything is set in stone. Conditions can literally be anything, so whether you are dealing with Suntrust or Bank of America, you’re likely going to have different conditions to deal wtih.
Avoid Commercial Foreclosure
All in all, if you as a commercial lending institution use the above tips and methods to further analyze your commercial client’s loan application, you’ll be much better off. Nowadays there’s everything from commercial lending training courses to online seminars. There are many reasons to take advantage of these software platforms as they can provide value above and beyond the initial investment. Whether you’re a large-scale SEO agency, customer support center, or telecom expense management company, you can benefit from understanding these commercial lending practices as well when applying for a loan to expand and grow your business or to avoid commercial foreclosure in the future.