Caterpiller Comeback

Have you ever purchased a car? Bought a house or simply needed quick cash? There are so many factors to consider such mileage on a car, market value on some property, repairs needed on a house and much more. While people spend so much time on the actual purchase, they tend to put the factors of obtaining a loan under the radar. The majority of people in the United States do not use their saving for large purchases; they use other people money. Although all of the other factors are very important; let’s discuss the considerations of obtaining a short-term commercial loan.

What is a commercial loan? Fundamentals of Financial Management states that a commercial loan is an unsecured short-term promissory note of large firms usually issued in denominations of $100,000 or more and have an interest rate somewhat below the prime rate (Brigham& Houston p.527). Short-term is a time span less than one year. No matter if the loan is 364 days it is considered short-term, however, if it so much as go beyond 366 days it is considered long-term. Commercial loans are used to meet businesses short-term financial needs. Short-term commercial loans are generally issued by other business firms, insurance companies, pension funds money market mutual funds and banks. They issue commercial loans most often because they are the main institutions that need large amounts of funds and tend to have great credit ratings and good reputation with securing debt. Commercial loans habitually consist of one of most national banks. When dealing with working capital, loans are temporary to take care of capital needs. At the end of the loan cycle which will be a year or less the full content of the loan will be repaid and depending on the contract, interest will be accumulated in the duration or the loan or at the end with the par value. Currently more working capital commercial loans are being secured through accounts receivables of a company or company inventory as collateral. Collateral for loans are legal mostly in the U.S., however, just like in any other business aspect banks must know the rules and laws globally due to that fact that in some foreign countries collateral is considered illegal.

An example of a short-term commercial loan is a lease for an apartment or home. A financial institution that was working on securing mortgages for two apartment complexes. They had to make the decision of whether to refinance or purchase the property. First, borrowers need to decide whether to use conventional financing or some form of hard money. Considerations of the decision involve time and funds as well as the credit rating and loan to value ratio. When dealing with credit rating, turmoil in the residential lending setting, lenders are raising minimum credit scores as part of underwriting criteria. This has generate an bizarre demand for commercial hard money. We expect the demand for commercial hard money to continue through 2008.

In circumstances where the credit score fails to meet conventional underwriting guidelines, the underlying property value is crucial to locating capital sources assuming a new business needs capital start a company. The entrepreneur will need not only a great business plan, but a good background history and a great credit score. More often, lenders usually adjust the exaggerated lease rate to market value, cutting the rate of the property value and lowering the total amount they will loan on the property. When dealing with commercial loans you must consider the time it will take to process such loan; and add a few days here or there for any errors. You must be careful of closing loans too quickly due to the fact that some lenders have a tendency to be shysters. Fast talk cuts back on valid information know before signing a commercial loan. In such a situation, you think that everything is going great with your loan and you eventually find out that you have balloon payments. According to an article on wisegeek.com “Balloon payments are large, lump sum payments made either at specific intervals, or more commonly, at the end of a long-term balloon loan. Balloon payments are most commonly