Home | Business | Trade
Short-term commercial loan alternatives are frequently forgotten because of misunderstandings about long-term commercial financing. Although long-term commercial mortgage options are often appropriate, there are practical short-term business financing choices that will be more workable for commercial borrowers in realizing profitable business loan outcomes. Critical Short-Term Business Loan Options Possibly the two most important short-term business financing approaches are short-term credit card financing programs and commercial property loan programs. Although both business loan and commercial mortgage programs are applicable to most business owners, these strategies are often misunderstood and misused. Short-Term Commercial Mortgage Business Loan Programs A long-term business loan is appropriate for many businesses that own commercial property. Business properties should normally be financed with a combination of short-term and long-term funds. When a longer-term commercial mortgage is viable, it is preferable to secure long-term business financing, preferably for 30 years. However there will be many commercial mortgage loan situations in which longer-term business financing is not appropriate for the business owner. In such circumstances it is important for a business owner to realize that there are viable short-term working capital management options. When is Short-Term Business Financing Preferable? If a business owner plans to sell or refinance their business within a few years, it is preferable to explore short-term business financing options. The best short-term business loan will have minimal prepayment penalties in comparison to terms commonly included with long-term commercial real estate financing. The avoidance of business loan prepayment fees and lockout fees fees in some short-term business financing programs is an important benefit of these short-term commercial mortgage approaches. The absence of these potential fees could produce a savings of up to 20% or more if the business property is sold during the period which would have involved lockout fees in a longer-term commercial loan. Short-Term Commercial Mortgage Limitations Substantial penalty fees will often be avoided with a short-term commercial real estate loan, but there are some important trade-offs to understand beforehand if a business owner wants a shorter-term commercial mortgage loan. When a short-term business loan is a possibility, the likely business financing will not include special purpose businesses such as funeral homes, the interest rate will frequently be in the range of 12% to 13% and the loan-to-value will typically less than 70%. Primary Candidates for a Short-Term Business Loan The maximum time period for a short-term commercial mortgage is usually three years. The most likely candidates for a short-term business loan are mixed-use, retail, office, multi-family and warehouse properties. Limited Lenders to Implement Short-Term Business Financing Business borrowers should be prepared for the shortage of lenders who can implement a short-term business loan effectively. There are many difficulties to be avoided with short-term business financing, and selecting a viable commercial lender is of critical importance when obtaining short-term commercial real estate financing. Credit Card Processing and Credit Card Financing Even successful business owners often require more business financing than they can obtain from a bank. For any business that accepts credit cards, working capital financing based on credit card processing is an effective but frequently-overlooked commercial financing tool. A relatively unknown commercial loan technique is probably the best business financing strategy to satisfy unusual cash requirements: using credit card processing to obtain a business cash advance. Retail and service businesses accepting credit cards can usually benefit from this business loan program. This credit card factoring strategy uses monthly sales volume and credit card receivables to secure a business cash advance. Credit Card Financing Based on Credit Card Processing Programs This working capital management strategy is also known as "credit card factoring". Many businesses have relied upon a working capital loan strategy called "receivables factoring" or "receivables financing" which allows them to sell their future receivables at a discount. Most small businesses cannot adequately document their receivables in order to qualify for this kind of working capital loan. Many other small businesses (such as restaurants, bars, retail stores and service businesses noted above) simply do not have such receivables to rely upon as a working capital management tool. What these businesses do have in many cases is documented sales volume and documented credit card sales activity. It is this documented level of sales volume and credit card sales activity that becomes a financial asset to the business and its working capital management strategies. Business cash advances from $5,000 to $300,000 can usually be obtained based on a merchant's sales volume and future credit card sales. The commercial financing repayment requirement for a working capital cash advance is normally under 12 months. For merchants that need the business cash advance program for a longer time, the merchant cash advance can be renewed on a recurring basis. Lender Limitations and Problems to Avoid with Credit Card Processing There will usually be only a few business financing sources that are regularly successful at executing the credit card financing and credit card processing. There are key difficulties to avoid with a working capital cash advance, and selecting an effective funding source is essential to any merchant needing a merchant cash advance. Copyright 1995-2007 AEX Commercial Financing Group and Stephen Bush. All Rights Reserved.
Article Source: http://www.rightarticle.com
About Steve Bush: Stephen provides candid business loan - credit card processing advice. Free Commercial Mortgage reports from AEX Commercial Financing This article is available as a unique content article with free reprint rights.
Please Rate this Article
5 out of 54 out of 53 out of 52 out of 51 out of 5
Not yet Rated
