Learn About Commercial Property Loans
Posted on August 12, 2010
Filed Under Debt Relief, Loans, Mortgage, Personal Finance, Refinancing Solutions | Leave a Comment
Commercial property loans are loans made using real estate as collateral to secure repayment.
Commercial property loans are a lot like residential property loans, except that the collateral is a commercial building rather than a residence. Usually a business will take on a commercial property loan, rather than an individual.
The borrower in a commercial property loan may be a any type of company: a limited liability corporation (LLC), a small business corporation (S-Corp), or even a partnership. This attribute of these commercial loans makes the assessment of the creditworthiness of the borrower very difficult compared with borrowers in residential property loans.
In some cases, commercial property loans are nonrecourse. What this means is that in the event of default in repayment, the creditor may only seize the collateral, and has no further claim against the borrower for any other assets. The reason for this is twofold: there are sometimes laws that significantly prevent the creditor from going after the borrower for any deficiency, and mortgages structured for sale as bonds will tend to give a higher priority to constantly receiving some sort of income and therefore require a clause that allows the lender to take the property immediately, regardless of bankruptcy proceedings that the borrower might be going through.
Many times the loan can be supplemented by a personal guarantee from the owner of a property, which makes the debt payable in full even if foreclosure on the mortgaged collateral does not satisfy the outstanding balance.
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