Borrowers are always told to read a document completely prior to signing it. But when signing documents for commercial real estate loans Texas, you might not have the time to read the entire document at the signing. And even if you had the time, you might not understand all of the technical and legal jargon. So you will want to be sure to request a copy of the document to review with your lawyer prior to the closing appointment to check out a few key pieces of information.
The first important information on the agreement is the loan payment agreement. This defines what is expected of you and includes provisions that protect both the lender and the borrower. This is where you will find the clauses about your payment schedule and if there is going to be a balloon payment due at the end of the loan term. These are basically all of the repayment terms that you are agreeing to for the money that you are borrowing.
Some commercial real estate loans Texas will also specify that you need to continue to provide the lender with financial information about the property and your business. This is to monitor the financial health of the borrower and ensure that payments will continue. There are also some commercial real estate loans Texas which will specify that you must maintain a certain debt to cash-flow ratio throughout the term of the loan. Additional covenants can stipulate asset sales, cash payouts and changes in the ownership of the business. These are all ways that the lender can ensure that the company remains solvent and that the business does not get too far in debt prior to paying off the loan.
One of the key stipulations in protecting your personal finances is negotiating a non-recourse covenant. This clause protects you in the event that your business fails and cannot repay the loan. If you have a non-recourse loan then the lender cannot force you to personally repay the loan. But if it is a recourse loan then you have personally guaranteed the loan and will need to find a way to repay it even if you close your business.
In the perfect world, your business will thrive and you will be able to accelerate your loan payments. This will allow you to pay the loan off early and save some of the interest that you would have paid the lender. But if your loan has an early pay off penalty, then you might be faced with paying extra fees. Some lenders will have a flat prepayment fee and others will charge a percentage of the interest that you would have paid. In most cases, you will still be saving some money, but you will want to be sure that you understand this potential penalty as well as all of the terms of the loan prior to attending the loan closing.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.