Why Commercial Lenders are Eager to Discuss Collateral

cta3revWhen it comes down to it, it really doesn’t matter which borrower you work with, collateral is always going to play a very important part when it comes to commercial mortgages. You might even notice that more and more commercial lenders are actually starting to rely on collateral more so than ever when it comes to a loan approval. Especially when the borrower doesn’t have the strongest credit history.

Commercial lenders have always been known to take collateral highly into consideration when approving a loan, but it the trend seems to be growing, with collateral being more of a factor. The type of property that you are wanting the loan for, as well as the location of the property is going to be one of the first things to be discussed. Some types of different properties have different guidelines for loans and the location is going to play a large role when it comes to property value.

What do most banks and commercial lenders consider as collateral? Collateral is usually assets like capital equipment or real estate. When you may not have the excellent credit score or proof of substantial cash flow, then your collateral is going to help you get that loan approval. But keep in mind that some will consider other things as collateral like credit card receipts. Either way, the better collateral you have to offer, the more chance of approval.

If for some reason, you cannot make your loan payments, then you would be able to use these assets as payment. Of course, you never want to have to rely on using collateral, but it still will help you get approved for the extra funding you are needing. Offering collateral is also a good way for borrowers to negotiate terms.

Real estate is one of the most common things to consider as collateral for Commercial Lenders

When it comes to collateral, real estate is probably the most easily accepted type. Especially commercial real estate, which is considered a hard asset, which is defined as an investment that comes with intrinsic value such as farmland, oil, natural gas and more. There is almost always a high demand for commercial real estate property, so it usually comes with large property value and considered a great form of collateral.

Most successful commercial lenders will not consider cash as collateral

Cash isn’t really a good form of collateral, especially when it comes to commercial bank loans. Commercial lenders are going to focus more on real estate and equipment as forms of collateral than cash or certificates of deposit. But sometimes cash will be taken into consideration if the borrower doesn’t have a lot to offer in equipment or if they do not happen to own any commercial real estate. They could have enough funds to get approval without having to present any collateral.

Dennis Dahlberg
Broker/RI/CEO/MLO
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.

Technorati Tags: commercial loans,commercial lending,commercial mortgage