Commercial Bank Loans, Why Bother?

Conventional commercial bank loans are well worth the additional scrutiny.  These loans offer the lowest rates, lowest fees, longest fixed periods, and longest amortization schedules currently offered in the market today, for your typical small commercial mortgages (Under $5,000,000). 

The key here for borrowers to realize is that most of the banks that use to offer conventional bank loans are now sitting on the sidelines, waiting for the economy to turn around.  Still other banks don’t have any capital to lend.  However, there are many banks out there that are still offering conventional bank loans.  They may not be local, but they are out there.

Most small local banks that are still lending are now only offering 20 year amortization schedules, with adjustable or 5 year fixed rate programs.  However, there are banks that are still funding 10 year fixed rate loans on 30 year amortization schedules.  For borrowers, increasing the amortization schedule to 30 years can be a substantial increase in cash flow.  Simply by spreading out the repayment period, borrowers can normally get a 20% reduction in monthly payments or more.

In addition, the benefits of having a long term fixed rate in this economy are obvious.  Many borrowers (and economists) are very concerned about potential inflationary pressures that might push rates to 1980 levels; as soon as the economy stabilizes and begins to grow again.  Some borrowers have literally opted to refinance out of their current lower rate loan, into a higher rate, though longer fixed rate program due to these concerns.           

Another major benefit to conventional commercial bank loans and the lowered fees offered.  For example, government sponsored programs, such as SBA loan or B and I loans typically charge an expensive 2 -3%, which is rolled into the loan amount.  Commercial bank loans in comparison are normally only 1%. 

Again, the important thing for borrowers to keep in mind is that there are banks out there that are still lending.  Do not let yourself get discouraged.  Perhaps your local banks aren’t lending, or are only offering really conservative programs, but if you take the time to research you can find viable sources.