Strategies For Avoiding Business Loan Rejections

The three major issues described here are very common problems encountered by business owners. the reasons described below will be important for typical commercial real estate loans.

Cash Out Limitations. The third reason for rejection of business loans will be seen frequently during refinancing attempts which involve a need to obtain cash by the borrower.

It is common for a traditional commercial lender to limit what the funds are used for and to restrict the amount of cash to as little as $100,000. Borrowers should realize that the bank is essentially disapproving the loan when they refuse to provide adequate cash to the business owner.

The third strategy for responding to a commercial mortgage rejection is to search for alternate sources for the loan. The commercial borrower’s mission (and it is not impossible at all) is to use a commercial real estate lender that will allow them to get much larger amounts of cash out of a commercial refinancing without restrictions on what they do with it.

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Collateral Required. Reason number four for commercial mortgage loan disapprovals is that the bank will not make a commercial loan without sufficient collateral such as a lien on personal assets.

Strategy number four for converting the declined commercial mortgage into an approved commercial real estate loan is for commercial borrowers to seek out lenders that do not “cross-collateralize” assets as a condition for obtaining a business loan. This will provide greater flexibility for the commercial borrower and avoid unnecessary (and unwise) connections between personal and business assets.

Required Business Plan. 0Reason number five for commercial mortgage disapprovals is when a bank’s loan officer determines that the business plan does not support the needed commercial loan.

Strategy number five for converting the disapproved business loan into an approved commercial mortgage loan is to save money and avoid possible delays by working with a lender that does not require a business plan. This can result in several primary advantages:

(A) Decrease commercial mortgage costs by several thousand dollars. A typical business plan (prepared to normal bank specifications) costs $5,000 to $10,000.

(B) Reduce the period needed to complete business financing. A typical time for a business plan to be prepared is one to two months.

(C) If a professional business plan is not needed, approval for commercial financing requires one less item.

Unfortunately, the circumstances described in this article are responsible for many commercial finance difficulties. However, as noted above, the five key reasons for loan officers rejecting business loans can be overcome by most business owners.

Similarly, with proper advice and strategies for small business mortgages, commercial real estate loans that are disapproved for other reasons (beyond the five issues described here) can also result in successful and effective commercial loans.