A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.

Iowa Commercial Mortgage Loan

Loan taken against some collateral apart from a residential property is called commercial mortgage Loan. A commercial mortgage is a loan taken against any collateral other than a residential property. The process of obtaining a commercial mortgage is the same as that of an ordinary mortgage.

The collateral in this case can be any one of the following:
• Non-residential property
• Non-farm property
• Business site
• Factory
• Business equipment
• Inventory
• Heavy machinery
• Shops, etc.

A Commercial mortgage loans involves a huge loan amount and is thus used for business or investment purposes whose returns can help repay the loan as well as earn a profit. Some of the ways a commercial mortgage can be used are as follows:
• For setting up:
         o A shop
         o A pub
         o A restaurant
         o A hotel
         o A b&b (bed and breakfast)
         o A new plant
         o A business or office premises
• For funding an existing mortgage or loan
• For expanding one's business
• Adding to business funds
• Clearing all the overdrafts in business
• Buying vehicles or machinery
• Buying land for construction purposes

Commercial mortgage loans are available through banks, commercial mortgage companies and private lenders. Commercial mortgage loans rates vary as widely as residential mortgage rates. Traditional banks offer some of the lowest rates available. However, they have restrictive lending criteria, which constrains them from making commercial mortgages for many kinds of commercial properties. Gas stations with or without convenience stores, for example, can be difficult to obtain commercial mortgages for. Commercial mortgages loans can also be difficult to obtain from traditional banks if you don’t have excellent personal and business credit scores.

Hard money commercial mortgage loans are also available through private lenders who have more flexible lending criteria. Also known as hard money lenders, private commercial mortgage companies focus more the current value (today’s selling price) of commercial property than on your personal financial package.

When applying for a Commercial Mortgage Loans, be prepared to provide with the following:
• 2-3 years’ taxes for you and/or your business
• 2-3 years’ financial statements
• A completed standard commercial mortgage loan application, which includes a personal and business balance sheet
• A description of the use of proceeds of the commercial mortgage you are seeking
• A description of the property
• The current selling price of the property
• The cost of improvements you will make to the property
• An estimate of the property’s value when with improvements
• A repayment plan for the commercial mortgage – how you will pay this commercial back
• For a hard money bridge loan, provide an exit strategy for the commercial mortgage – will you refinance this commercial mortgage with a traditional bank after making improvements or alterations to the existing property or some other scenario?

If you are working with a private commercial mortgage loan company (hard money lender) be prepared to show a proof of funds with your initial application. Providing reasonable proof that you are prepared to cover the closing costs and fund the difference between the commercial mortgage and the total cost of the property will make your commercial mortgage loan application move through the steps to funding much faster.