Reasons to Avoid Banks for Commercial Mortgages
Banks serve a vital role in a country’s economy. However, when it comes to business loans, there are lots of reasons to consider other sources other than banks. With a good number of business loan borrowers, banks have declined their loan application. Let’s discuss some good reasons business owners might not need to go to a bank for a commercial mortgage.
Minimum commercial mortgage for most banks is over $250,000. With other business lenders, the standard minimum commercial mortgage is $100,000.
Most banks limit the amount a borrower can receive when financing a mortgage. When a borrower wants to refinance their business property with other lenders, they can generally get up to $1,000,000.
Most banks are reducing their mortgage interests in properties such as funeral homes, auto service businesses and bars/restaurants. Other lenders are quite interested in these business categories for a commercial mortgage.
Most banks will need tax returns for mortgages. Other lenders don’t need tax returns or other income verification for a commercial mortgage. Most banks that do not request tax returns will ask borrowers to sign an IRS Form 4506 but the other lenders don’t usually request borrowers to sign the form.
Banks need balloon payments or the borrowed loan will be subject to recall after very short periods such as 3-5 years for commercial mortgages. With commercial mortgages via other lenders, all properties are qualified for 25-year loans and others even up to 40 years.
Banks vs. Other Lenders
Most banks need you to produce a business plan for a commercial mortgage. The cost to do this is a few thousand dollars. Other lenders typically don’t need a business plan as part of their underwriting process to give a commercial mortgage.
Most banks will request cross collateralization of your own personal property for a commercial mortgage. Other lenders won’t request cross collateralization of your own personal property for a commercial mortgage.
Most banks request for income verification even after the commercial mortgage closes. Non-bank business lenders don’t need income verification either after or before a commercial loan closes.
Very few banks provide an assumable commercial mortgage. Non-bank lenders have an Assumable Commercial mortgage which includes amounts of up to $1 million.
Most banks take an upfront commitment fee. Other lenders often don’t charge an upfront commitment fee for these mortgages.