Taking out a commercial property loan is an investment in the future of your business as well as being an investment in the economy itself. Property is one sector of the economy that is able to ride out the worst of a recession. Although there are times that the real estate market dips and prices tend to decrease, property will always be one of the safest investments to make as a long term strategy. They are essentially the same as any other type of mortgage, except they are structured for the exclusive use of commercial property.
They can be described as a property that will be used to create future income for the owner. Most are bought with the idea of developing the property based on the type of business needs that there are in the area. This could be housing, in terms of multi unit dwellings or apartment buildings, or it could even be the development of retail space in a certain area. One of the most common types of commercial development is to create a mixed retail/office space. Obtaining finance with a commercial property loan though, is easier said than done in the present economy. While traditional banks and lending institutions are tightening their belts as a way of waiting for the dreaded 'double dip' in the economy, there are some forward thinking and progressive financial institutions who will be able to help you develop a commercial property as an investment.
This loan is slightly more complex that a normal mortgage in that is taken out by the business as an entity. There are many different types of business structure and they have different needs as well as financial structures that will play a large factor in how the loan is structured. Most business commercial property loans include a nonrecourse clause and it is always wise to insist on one when entering into an agreement with a financial lending institution. A nonrecourse clause allows for the protection of the assets of the business owner in the case of no payment of the loan. The property can be repossessed, but the personal assets of the business owner, and the business owner himself will not be liable for the payment of the loan. Of course, some business owners do offer their personal assets as a guarantee for the loan, but this is only wise if there is very little chance of no default on the commercial property loan.
They can be used to purchase land as well as to develop the land on an existing property. It may be wise to do an independent study that can be used as part of a proposal to a lending intuition when applying for a commercial property loan. Most lending institutions will do an in-depth analysis of the property as well as the income potential and will be able to advise a business owner on the correct way of structuring a commercial property loan.