While trying to get the right type of commercial finance it is important to remember that a commercial mortgage is different from a residential one. The lender will take different factors into consideration and this is going to determine interest rate and loan amount. The rate of interest is based on what you are going to do with the money you borrow and an assessment of the property in question relating to the loan. After these factors and others have been taken into account the rate will be set out. As with any loan the amount of interest you pay will be a percentage above the base rate.
Commercial loans are available from a one year period onwards. The duration of the loan is based on many different factors such as the size of the undertaking and the nature of it. The majority of loans taken this way will be limited to interest only borrowing unlike the choices for residential mortgages.
The repayment term can be anything between one and fifteen years on average and you can either choose a packaged based on fixed interest rates or variable interest rates. In the former, the interest rate is set at the beginning of the term of the loan, the percentage given being determined by your circumstances, the amount of the loan, the term and your assessed ability to repay the loan by the due date. Your monthly repayment amount remains constant, regardless of changes in the bank base rate which is an advantage if the rate increases but a disadvantage if it drops.
Variable Rate on the other hand are linked to fluctuations in the bank base rate and can therefore increase or decrease depending on what is happening in the open market. You will consistently pay the current market rate plus an agreed premium but because the base rate can change, your monthly repayments could go up or down. This is an advantage if interest rates fall but you may end up paying a lot more if rates rise.
Applying for and sanctioning a commercial finance is complicated and expensive process depending on the lender and the amount you want to borrow. There are also a lot technical terms and fine prints which may be difficult for you to understand or notice. There could also be hidden costs which may escape your attention. Hence, getting advice from a professional commercial finance advisor can help you immensely if you want the best start in your new venture and to get the most suitable and economical deal. You can also get help from a specialist website, which can save time and money.
Competitive commercial finance advisors are usually professionals that businesses or individuals consult on business financing and corporate banking relationships. They are experts in various commercial finance options available and have a thorough knowledge of business cash flow and bank credit assessment processes. Hence, one such expert could be very useful to you to steer clear of the pitfalls of a complex commercial loans clearance and get the best deal possible.
