Can I Negotiate With Commercial Lenders for a New Loan?
Commercial lenders include commercial banks, private lending institutions, hard money lenders, financial groups, and mutual companies. They are mostly used for commercial real estate acquisitions, short-term fundings or businesses that need resources to address seasonal orders or cater to sudden demand.
Their key responsibilities are handling prospective clients by identifying their needs, interpreting their financial statements, securing collateral, and gathering other required documents such as insurances and agreements. Once the borrower has submitted all the requirements, they can start negotiating the rates and terms of their commercial loan to lessen the burden that interest rates can incur.
What can be negotiated
Here are a few options on what can be negotiated:
Interest Rates
Interest rates will significantly impact their monthly payments. Negotiating the lowest possible interest rate will help their cash flow, especially at the beginning of their loan. During this time, renovations are still being completed for new businesses, and the cash flow is at the lowest. These rates may be set for 5 to 10 years, and if they can find lower rates now, they will be able to have more flexibility in the future.
2. Closing Costs
Negotiate that the seller covers some or all of the closing costs. These may include taxes, title fees, recording, and attorney fees. In some transactions, these fees are already included in the seller’s full asking price, and if not, they may be negotiable.
3. Quick Transaction
They can save time by negotiating to speed up the transaction, this will mean less paperwork and a faster process, but they will also need more cash-on-hand.
4. Less Miscellaneous Fees
By negotiating on inspection fees, appraisal, and title fees, they can save a lot of money, especially if these are fees paid for by the seller, such as inspections of the elevators or roofs.
5. Prepayments Penalties
Ask the commercial loan officer about prepayment penalties. These penalties can help lower the interest rates. They should keep in mind that if they negotiate a five-year prepayment penalty term, they will still own the property during that duration. If not, then the terms may be forfeited, and they will need to pay the total originally due with additional fees.
Another way of negotiating with a commercial lender is to look at other available loan programs, such as interest-only payments loans. This type of loan allows the borrower a larger payment set on a future date rather than a monthly fee. Long-term fixed-interest commercial loans that are longer refinance loans, hard money loans from private investors, and bridge loans offer lower interests than hard loans.
There are also construction loans to help cover material and labor expenses—blanket loans, where they can have one financial arrangement to various properties. Not only does this mean less paperwork, but it also increases the investment options. Commercial leaders will provide the borrower with excellent flexibility, and they may have higher-interest loans than most bank loans. Still, they can offer longer terms, allowing the business to grow at a momentum.
For more information, you may reach us at info@cbi-commercial.com.