Repayment of a Commercial Mortgage

Lenders offer different terms for repayment of your Commercial Mortgage loan. The repayment terms are a combination of the length of repayment, the interest rate and the amortization calculation.

As a simple example to demonstrate using a Residential property, a 30 Year Fixed Rate mortgage with a 30 Year amortization means the length of the loan is 30 Years, the Rate won’t change because it’s fixed, and the loan will be paid in full, or fully-amortized, at the end of the 30 year term based on equal monthly payments.

That example is a typical mortgage for a Residential property. Owners of Residential property may vary in the type of mortgage they take, but the loan illustrated above is a good starting point to illustrate the difference in Commercial loans.Commercial Lenders tend to Offer loans with different combinations of Term, Rate, and Amortization.

A Commercial Mortgage may have a term of 5, 7, 10, or 20 years. But the amortization period used to calculate the equal monthly payments may, in fact, be longer than the term of repayment. In addition, Lenders very often offer variable interest rates on their Commercial Mortgage loans.

Many Traditional Lenders for Commercial Mortgages offer a loan due in full repayment at the end of 7 years, or a “balloon payment”, with a One Year variable rate which adjusts annually for the 7 year term, and a monthly payment calculation based as if the loan were being repaid over a 30 year term.

Commercial Mortgage loans tend to be a riskier financing investment for Lenders.  And risk goes directly to the determination of repayment terms.  The less risk involved for a Lender on a loan, the more favorable the terms for the Borrower.  Thus, it is highly unusual to see a Commercial Mortgage loan offered with similar terms to a traditional Residential Mortgage loan.

The “balloon payment” due at the end of the term of the loan, whether it’s 5, 7, 10, or other, means the Lender expects the entire loan to be repaid at that time.  Many Lenders will offer a Borrower the opportunity to refinance their Commercial Mortgage loan with the same Lender.  And, as often happens, the Lender will offer similar terms on the newly-refinanced mortgage loan.  In this way, Lenders, especially Traditional Lenders, minimize their risk exposure on a given Commercial property and/or the Borrower.

As discussed in our previous blog, “The Right Conversation,” our role as a Broker is to secure the Commercial Mortgage financing solution you need, but also with terms that are most favorable for you and your Commercial property.

For example, we have several Lenders on our list who offer a Commercial Mortgage with terms very similar to the tried and true 30 Year Fixed rate Residential loan.  Call us now to find out how we can locate the best financing for your Commercial property.

Visit our Financing Fodder YouTube Playlist for more information on how to prepare yourself when requesting a business loan.

The Right Conversation

Too often, business owners have preconceived notions about financing their businesses, whether it’s for a commercial mortgage or credit financing. These ideas arise out of common perceptions about how traditional lenders make credit financing decisions.

And then they speak with their banker. We’ve already discussed the idea that your banker is very often a “gatekeeper” with the “keys to the vault.”  For a business owner, gaining access to the money in the vault can be a daunting process, and that initial conversation with the banker proves out this theory, especially with reinforcing those preconceived notions.

The truth is this: having a conversation, the right conversation, with someone who has your business’ best interests at heart can lead to a different result. That result can be financing the business owner needs to move forward and continue to build their business.

The right conversation with a broker who is working for you and not working for the lender will very quickly wipe away those preconceived notions.

Credit is one of those conversations. The concept that credit must be a very high score with impeccable payment histories is an idea that can be changed with the right conversation. Because there are lenders out there, non-traditional lenders, who have a more forgiving attitude towards credit blemishes.

Same with income tax returns and the dreaded “bottom line” income. Traditional lenders use a decidedly more rigid approach to income-qualifying. That rigid approach can lead to a denial of your loan request.

The right conversation with a broker who has the ability and who works with both traditional and non-traditional lenders will simply assist to “translate” the true income-producing potential of your business that will lead to a positive result.

Visit our Financing Fodder YouTube Playlist for more information on how to prepare yourself when requesting a business loan.

Our Comfort Zone is Unsafe

I’ve been skydiving, twice. Yes, it was terrifying, both times. I imagined all the worst case scenarios…and they all resulted in death. When you jump out of an airplane at 13,000 feet, there’s that first feeling of free falling. Queue Tom Petty, please.

This is not butterflies; this is sheer terror. For many split seconds, I wondered: “how did I get up here, jumping into this big blue sky that’s so high?” But I did it. I got out of my comfort zone. And I lived to tell this tale.

Doesn’t it make you nervous to get out of your comfort zone? It makes me nervous. For instance, I didn’t want to write this blog for fear of having to take my own advice.

I’ve gotten out of my comfort zone in my business, too. I had no choice. I had a deliberate plan to build my business to a certain level. The only way to get to that level was to get out of my comfort zone, jump out of the metaphorical airplane and do things that were uncomfortable but necessary.

Why would you get out of your comfort zone if  you know something works? Getting out of your comfort zone implies pain. Who wants pain?

There’s a reason we do things that scare us. When we do something scary, we put ourselves in a situation and/or surround ourselves with circumstances that we wouldn’t otherwise experience. But, the real problem with staying in our comfort zone is missing out on opportunities.

Skydiving and/or public speaking provide opportunities to learn about ourselves by getting out of our comfort zone and trying something new, and potentially scary. I survived both skydiving jumps and I managed to leverage the two experiences into successful marketing campaigns for my business. This opened up opportunities to win clients. The bonus was also being featured in a book, Make What You Say Pay, by Anne Miller, Sales and Presentation Coach.

Sometimes, doing what we know feels productive. When we want something done, we do it ourselves. Like marketing. Or fixing a leaky faucet. We’re in our comfort zone; we believe we know what to do, and we believe it’ll get done faster. But sometimes getting it done faster isn’t the most efficient use of our time. And sometimes, we actually fail. Sometimes, that leaky faucet repair we tried to fix ourselves turns out to be a disaster.

How do you move from being set in your ways to getting out of your comfort zone?

First, if you have a doubt or fear about doing something you’ve never done before, realize that could be a trigger that there’s experience and growth waiting for you. The fear of jumping out of the airplane is replaced by positive anticipation of the experience. Sheer joy is so much better than sheer terror.

How else can you execute on this trigger?

Decide how you want to grow. Is it personally or professionally? Or both?

  • Do you want to grow your business to the next level?
  • Do you want to have more adventure in your life?
  • Do you want to date more suitable companions?

Be specific in setting your goal so you can know how to proceed with the following task which is to research activities necessary to perform the fearful task. Taking on small challenges will lead to the ultimate goal if you break it down into mini deadlines.

Speaking of public speaking, if you fear public speaking, join a Toastmasters Club. This practice will hone your skills while in
front of a group. This will begin to build good habits around this activity.

As part of achieving my previous business goals, I wanted to get over my fear of public speaking. Not only did I join a Toastmasters Club, I also enrolled in an Improv Acting class. This practice of being in front of people diminished the feeling of embarrassment while performing “think on your feet” acts.

You can discuss with a friend or colleague how to bring life to your thought. Then make the bold move and announce it to the world. To assist with staying accountable to the task, calendar each progression so you know how far out of your comfort zone you’ve come.

All of these activities assist you to imagine your outcome of success. Trish Tagle is an expert in leadership training and troubleshooting organization efficiency in order to evolve businesses. Trish is famous for saying, “imagine the outcome.”

Here’s a great example of a business owner who challenged her team to get out of their comfort zone.

My friend and colleague, Kelly Piro, owner of  Agency Performance Partners invited me to judge a “Sales Showdown” for her company. Twice a year, the APP consultants undergo role-playing exercises in order to practice how they interact with prospects. The objective is to convert prospects to clients faster.

ROLE-PLAYING? Yes!

The APP team had various scenarios such as being at a trade show, being on a sales call or in an initial sales meeting. There were several of us observing while the team role-played their scenarios. By critiquing their performance, the judges and the fellow team members pushed everyone out of their comfort zones. It was easy to do in the role-playing scenarios because it was practice, it was imaginary, and no one actually jumped out of an airplane.

Outsourcing important tasks is another way to get out of your comfort zone. Like hiring a plumber to fix that faucet. Cost tends to be the primary impediment before people make the call to the plumber. It’s “comfortable” to think we can save money by doing it ourselves.

But we have other things to do with our time and we’re not actually plumbers, are we?

Interesting in marketing, email us at Curious@AuroraConsulting.biz.