Commercial building financing has several benefits over traditional financing. Anyone that is considering purchasing a commercial building should consider exactly how profitable it can be. There are a few important key factors that lenders will use to determine if the building can be considered a good investment. Here are a few things to think about when debating whether or not to use commercial building financing.
Protect Your Assets
When you want to buy business property, you can actually make the purchase through your business name. Therefore, you do not have to go out and try to tie up your individual credit in order to secure the loan. If anything negative were to happen with the new business, your personal assets will not be attached. This is a huge advantage over traditional mortgages as they require personal collateral to get started in most cases.
Unique Criteria
Applying for a normal loan will come with a certain amount of scrutiny over your affairs. You will be asked your personal credit history, income, savings and a number of other factors. These criteria will add up to paint a picture of whether you are a good risk or not for the bank. However, with commercial building financing, the strength of the loan depends upon the asset itself.
If the building looks to be in a high-traffic area with a good business plan behind it, the bank will be much more likely to loan you the money you need. The risk factors associated with you will be assessed to a degree as well, but it is nice to know that the property itself is just as important. The bank knows that if you default on the loan, a good property will recoup their losses fairly quickly.
By using a business name, the credit score of the business itself will be pulled to determine whether it is a good risk. You can create a good credit score relatively quickly for your business. If you lack a credit history, open an account with someone that reports to the credit bureaus. Make a few small purchases and pay them off within the time period. Do this for a few months in a row and your company's credit report will start to look good to lenders.
No Personal Effects
Buying a residential mortgage will result in a new debt on your credit report. Most people only have a certain amount that they can borrow before the credit runs dry. Therefore, it is important to keep as much credit open as possible so that you can buy things when you need them.
Buying a residential house tends to dry up the credit rather quickly. With a commercial loan, the credit will not be attached to your personal credit report. Even if you are the sole guarantor of the loan, it will usually not show up on your report if you used your business name. This can be extremely valuable to those who want to make other investments beyond their commercial buildings.
