Due to misunderstandings about long-term commercial financing, short-term commercial loans are often not considered properly. Although long-term commercial real estate financing options are often appropriate, there are practical short-term business financing choices that will be more workable and profitable for commercial borrowers.

The most critical short-term commercial financing techniques typically include short-term merchant cash advance and credit card processing programs and commercial real estate loan programs. Both working capital funding approaches are frequently a source of confusion for business owners.

An underutilized commercial financing strategy for businesses is possibly the best commercial loan strategy to secure cash for their business: a business cash advance using credit card processing. Credit card financing is an effective business financing tool that is usually overlooked by any business accepting credit cards as a customer payment method.

Service businesses, restaurants and retail stores are the most likely candidates to benefit from this working capital cash management strategy. This funding strategy uses an under-utilized business asset (credit card receivables) to obtain business cash advances based upon sales volume. This working capital cash strategy is also known as credit card factoring. Some business owners have used receivables financing or factoring which allows them to sell future receivables on a discounted basis.

Not all service and retail businesses can document business receivables to obtain a commercial loan. Businesses such as bars and restaurants do not typically have receivables to use for business financing. What these businesses do have in many cases is documented sales activity. It is this documented level of credit card sales activity that becomes a financial asset to the business and its working capital management strategies. Business cash advances from $5,000 to $300,000 can usually be obtained based on a merchant’s sales volume and future sales.

The commercial financing repayment requirement for working capital advances is normally under 12 months. The arrangement can be renewed for merchants that need the business cash advance program for a longer time.

There will usually be only a few business financing sources that are regularly successful at executing the credit card financing and processing. There are key difficulties to avoid with a working capital advance, and selecting an effective funding source is essential to an appropriate business cash advance program.

A long-term commercial mortgage is appropriate for many businesses that own commercial property. Business properties should normally be financed with a combination of short-term and long-term funds. When a longer-term commercial real estate loan is viable, it is preferable to secure long-term business financing, preferably for 30 years.

However there will be many commercial mortgage loan situations in which longer-term commercial financing is not appropriate for the business owner. In such circumstances it is important for a business owner to realize that there are viable short-term working capital strategies.

It is prudent to explore short-term commercial loan choices for business owners who want to refinance or sell the property within a short time frame. Appropriate short-term commercial mortgages will have more reasonable lockout fees and prepayment penalties than typically required with long-term commercial real estate financing.

While we will not attempt to describe the technical aspects of commercial loan prepayment fees and lockout fees in this article, we will note that the absence of such fees in most short-term commercial mortgage loan programs is a very positive aspect of these short-term working capital management options. The lack of such penalty fees could easily translate to a savings of 10% to 30% or more if a business owner needs to sell their commercial property during the time period which would have triggered prepayment fees and lockout fees in traditional longer-term commercial real estate loans.

Although prepayment and lockout fees will typically be avoided with short-term commercial mortgage loans, there are some trade-offs to be made if a business owner selects shorter-term working capital loans. When short-term commercial mortgages are available, they will usually not be readily available for special purpose commercial properties, the interest rate will frequently be in the range of 11% to 13% and the loan-to-value will typically be under 70%.

Multi-family, warehouse, mixed-use, office and retail commercial properties are the best candidates for short-term business finance options. For a typical short-term commercial loan, business owners should be comfortable with a time period of less than three years.

Few commercial lenders are capable of successfully executing short-term business financing. There are also numerous problems to avoid with short-term commercial mortgage programs, so selecting a lender is critical to business owners wanting a short-term business loan involving commercial property.

It is sufficiently important to repeat that a vital key to successful short-term commercial loans and business cash advances is selection of an appropriate lender. Despite the potential benefits of shorter-term business financing, the choice of a lending source cannot be overlooked.

In the typical capital structure for commercial real estate, senior debt usually accounts for 50-70% of the capital stack. By definition, senior debt is just that. It is senior to equity and all other forms of mezzanine (junior, subordinated) debt. As such, senior debt stands first in line before all other creditors for interest and principal payments and, in the event of liquidation, the repayment of debt. Most senior debt on commercial real estate is amortized over 15 to 40 years, with interest rates, either fixed or floating. Rates tend to be based on the quality of the collateral involved and the propertys historic cash flow, with higher rates tied to the degree of risk involved.

Many commercial real estate loans mature in three to ten years, resulting in a balloon payment at the end of the term. Remington professionals are equally adept, however, at securing financing across the capital stack for virtually any business purpose, with or without the involvement of real estate, including loans for expansion, working capital, operating capital, investment capital, etc.

By and large, asset-based business loans have lower interest rates than unsecured loans and may be tied to the particular asset being purchased or other assets of the borrower.

Fixed Rate Loans: Fixed rate loans offer borrowers an unchanging rate of interest, with predictable payments for the life of the loan. Because of strong relationships with public and private sources of capital, many opportunities exist for the financing experts at Remington to negotiate with lenders on transaction terms for such loans, particularly interest rates, as well as maturity and prepayment penalties. All of which assures Remington clients of the best possible and lowest-cost financing package available.

Floating Rate Loans: Floating rate loans are typically tied to the London Interbank Offered Rate (LIBOR) plus some point spread over the base rate. Attractive to borrowers with a two-to-four year financing requirement, floating rate loans are adjusted periodically, have minimum or no prepayment penalties, and cost less than fix rate loans because of the risk of rising interest rates. This type of loan has been particularly popular of late because of the historically low interest rates experienced in recent years. Remington professionals are highly experienced in securing such short-term financing or employing it as an integral part of a longer-term overall financing strategy.

Construction Loans: Commercial construction loans typically are short-term loans used to finance the cost of building new warehouses, industrial buildings, retail centers, apartment complexes or other properties destined to be sold or rented to others or operated by the owners. These loans tend to be varied, depending on the project, construction time, and borrowers experience. They are meant to be paid off when construction is completed and a certificate of occupancy issued. Borrowers usually require another mortgage to pay off the construction loan when it comes due. Thus the overall process may entail two loan applications with their associated fees and closings a potentially complex and time-consuming process that the experienced financing professionals at Remington can coordinate, facilitate and expedite. For more information on construction loans click here.

Bridge Loans: The bridge loan is a form of financing that bridges the gap between funds needed now and when longer-term financing becomes available. It can be a key component in an owners long-term financing strategy, particularly for those faced with a here-and-now opportunity or other situation, such as improving or selling a property.

Real estate owners often come to Remington to help secure a bridge loan to purchase a second property before the sale of the first property closes, with proceeds from the sale used to pay off the bridge loan. This illustrates the important exit strategy borrowers must have before an investor makes a bridge loan. In the foregoing example, the investor would need to see a signed sales agreement spelling out where, when, and how the bridge loan will be repaid.

Bridge financing almost always needs to be arranged and closed quickly. Such loans tend to be for 6 to 12 months with a possible 12-month extension. They are usually structured as simple interest only loans with no pre-payment penalty and all principal due in full at maturity. Risk to the investor is minimal since the loans are underwritten based on existing equity in the property and a defined exit strategy.

Because of the owners need for timeliness, banks and other institutional lenders are not usually effective when it comes to bridge loans. That is why the Capital Markets Group at Remington provides access to investors capable of making on-the-spot decisions. Included among these investors are hedge funds, private equity groups, mortgage pools and other sources of private capital. For information on hard money loans, another type of short-term loan, click here.

Hard Money Loans: There is another type of short-term loan that is similar to the bridge loan in some ways but substantially different in others. It is called the hard money loan. Hard money loans and bridge loans are similar in that both types can be quick to close. Both may be needed for a short period of time. And both undergo limited or less severe underwriting processes. But, while the bridge loan investor requires a definite exit strategy, the hard money source may not. Moreover, bridge loans frequently have a loan to value ratio of 70-95%, whereas hard money loans will not exceed 50% LTV.

Hard money loans also are generally more expensive. Unlike bridge loans, which focus on exit strategy, hard money investors emphasize collateral, making certain enough collateral exists to collect the debt in the event of default. Because the two types of loans have similarities, borrowers frequently misjudge which is best for them. More than three-fourths of those who say they want a bridge loan qualify only for a hard money loan because, for example, the borrower has less-than-average credit, a modest financial statement, too little experience in commercial real estate, or no defined exit strategy. The financing experts at Remington can quickly sort out any such confusion and quickly align the client with the appropriate type of financing and related investor.

Understanding the basics of each car financing option is key to choosing the automobile financing strategy that best suits your situation. Here is an overview of auto financing options that may be available to you.

Auto Loans from Lending Institutions

You can get a car loan from a bank, credit union, or other lending institutions. The car that you purchase will serve as collateral for the auto loan. This means that the lender can repossess your vehicle if you default on the car loan. Auto loans are a popular car financing option because they generally offer reasonable interest rates and are relatively easy to get.

Two factors are likely to affect the total cost of the car loan. One is the term or duration of the loan. Generally, the longer the term of the loan, the lower your monthly installment will be. But you will end up paying more towards interest and this will increase the total cost of the auto loan. If you can afford it, get a short-term loan. Your monthly installment will be higher, but you will be paying less money over all. The second factor that may affect the total cost of your car loan is your credit rating. Creditors with less-than-stellar credit history are usually charged a higher interest rate because of the elevated credit risk.

How can you put a limit on learning more? The next section may contain that one little bit of wisdom that changes everything.

Dealer Financing

Like traditional auto loans, dealer financing is reasonably easy to get. Most dealerships have relationships with numerous lending institutions, so they can arrange car loans even for car buyers with blemished credit histories. To compete with traditional bank loans, many dealerships offer zero percent or very low interest on dealer loans. However, such loans are available to car buyers with stellar credit ratings. Consumer experts advise car buyers to get pre-approved on an auto loan from a bank or credit union before approaching the dealership for possible financing. By getting loan pre-approval from another lending institution, a car buyer gets the upper hand when bargaining for a lower rate on a dealer loan.

Home Equity Loans and Home Equity Lines of Credit

If you own a home and have accumulated substantial equity on your property, then you may consider getting a home equity loan or a home equity line of credit. Home equity loans are fixed or adjustable rate loans that you repay over a predetermined period. Home equity lines of credit are open-ended, adjustable-rate revolving loans with a maximum credit limit based on the equity of your home. Home equity loans tend to have lower interest rates than credit cards and other types of personal loans. Interest payments on home equity loans may also be tax-deductible up to a certain extent. Home equity loans and home equity lines of credit use your home as collateral, so make sure you are financially capable of paying the monthly installments if you don’t want run the risk of losing your home.

Credit Cards

A credit card advance or credit card draft from your credit card company can help you drive your dream car home. Like home equity lines of credit, credit card advances or credit card drafts are revolving lines of credit with variable interest rates. To entice existing customers to avail themselves of credit card drafts, credit card companies waive cash-advance fees, guarantee low rates during the initial period of the loan, or offer high credit limits. However, because credit card drafts are unsecured, they generally have higher interest rates than home equity loans, traditional auto loans or dealer loans. Financing your auto purchase through credit cards could also leave you vulnerable to hefty penalty charges if you make a late payment or exceed your credit limit.

You can’t predict when knowing something extra about automobile financing will come in handy. If you learned anything new about automobile financing in this article, you should file the article where you can find it again.

What is Accounts Receivable Financing?

In its simplest terms, accounts receivable factoring is the selling of your outstanding receivables at a discount to a factoring company. Accounts receivable financing is also known as accounts receivable factoring or accounts receivable funding. In this transaction, the factoring company pays you a percentage of the accounts receivable up front, typically 75-80% of the total, with the remainder to be paid once the invoice has been paid. The factoring company will charge you a nominal fee for the transaction, but will handle the collections of your accounts receivables that you have sold to them. The fee that you will be charged will be based upon the factoring company that you select, the amount of the invoices that you sell and the duration of time that it takes for the invoice to be paid. Typically, the shorter the time it takes to have the invoice paid, the smaller the factoring fee. So, for companies that have clients who quickly pay their invoices, the fee could be as small as 1%.

The process of accounts receivable financing is quite simple. Your business will sell your accounts receivable, either all or a portion, to a factoring company in return for a discounted rate. The factoring company will generally wire you the funds the same day or the next day once they have received their proper paperwork, and then they will handle the collections of the invoices. Once the invoices have been paid, the remainder of the invoice, minus any applicable fees will be paid to your company directly. Most factoring companies will provide you with a consolidated monthly statement so that you can review the transactions and for your company’s record keeping.

Benefits of Accounts Receivable Financing

Pass off Collections: Outsourcing your accounts receivable management to another company can free up your previously dedicated accounts receivable resources to focus on other more productive activities such as selling. Once you sell your accounts receivables, the factoring company manages collection of the payment.

Free up Working Capital: Most small businesses have a need for additional working capital, yet have their assets tied up and are unable to qualify for additional financing. Accounts receivable factoring can provide your company with cash as quick as the same day for invoices submitted. This cash can then be used for your customary business expenses, to meet payroll or for business expansion needs.

Quick Financing: Accounts receivable factoring will not require a business plan, long applications, credit checks, tax statements or other financial information. Accounts receivable factoring is not considered to be a loan, so there is much less qualification work involved to establish a relationship with a factoring company. Also, the approval process can generally only take a few days instead of a few weeks when compared to traditional financing.

Assistance with Slow Paying Customers: One of the challenges that many small businesses face when trying to grow is that many of the larger customers that they are looking to partner with have slow paying accounts receivable policies. For example, many larger retailers have a standard payment policy of 90-120 days. If it requires a substantial amount of capital to fulfill their product orders, your small business could be placed in a cash crunch simply by accepting a great new, large retail customer. Accounts receivable factoring allows you to sell this invoice for a discount in order to capture the capital that you had to spend in order to fulfill the order.

Selecting Factoring: Many factoring companies will allow you to pick and choose which invoices you send to them to factor. This can mean a substantial cost savings to your business and will allow you to factor only the larger invoices, or the ones that you know in advance are going to be paid in the mid term, giving you the cash that you need and helping to justify the fees associated with factoring.

Once you are ready to consider factoring as an option for your accounts receivable, ask the following questions of the companies that you are interviewing:

* Is the money needed necessary for your company’s survival? Or, are you looking to take advantage of a business opportunity?

* How does this financing strategy match with your business plan? If you so not already have an established business plan in place, put one together prior to seeking factoring financing. Having a solid business plan will help you to make choices for your business that are in alignment with all of your business purposes and goals.

* Is your business in need of expansion capital? Have you explored other more traditional methods of financing?

* Have you reviewed the real cost of factoring your accounts receivable? For example, what percentage of your current repeating customers pay on time, how many pay late and do you traditionally have any issues with customers who don’t pay?

* Have you researched multiple factoring companies to determine their rates and services before selecting one?

Getting financing can often mean the difference between a company closing its doors and staying open.

While it can do more than just prevent bankruptcy, many business owners are not aware of the process or its benefits. Spend the necessary time to investigate the companies you are working with, inspect the contracts prior to signing, and work to negotiate discounted rates for your business.

Understanding the basics of each car financing option is key to choosing the automobile financing strategy that best suits your situation. Here is an overview of auto financing options that may be available to you.

Auto Loans from Lending Institutions

You can get a car loan from a bank, credit union, or other lending institutions. The car that you purchase will serve as collateral for the auto loan. This means that the lender can repossess your vehicle if you default on the car loan. Auto loans are a popular car financing option because they generally offer reasonable interest rates and are relatively easy to get.

Two factors are likely to affect the total cost of the car loan. One is the term or duration of the loan. Generally, the longer the term of the loan, the lower your monthly installment will be. But you’ll end up paying more towards interest and this will increase the total cost of the auto loan. If you can afford it, get a short-term loan. Your monthly installment will be higher, but you’ll be paying less money over all. The second factor that may affect the total cost of your car loan is your credit rating. Creditors with less-than-stellar credit history are usually charged a higher interest rate because of the elevated credit risk.

Dealer Financing

Like traditional auto loans, dealer financing is reasonably easy to get. Most dealerships have relationships with numerous lending institutions, so they can arrange car loans even for car buyers with blemished credit histories. To compete with traditional bank loans, many dealerships offer zero percent or very low interest on dealer loans. However, such loans are available to car buyers with stellar credit ratings. Consumer experts advise car buyers to get pre-approved on an auto loan from a bank or credit union before approaching the dealership for possible financing. By getting loan pre-approval from another lending institution, a car buyer gets the upper hand when bargaining for a lower rate on a dealer loan.

Home Equity Loans and Home Equity Lines of Credit

If you own a home and have accumulated substantial equity on your property, then you may consider getting a home equity loan or a home equity line of credit. Home equity loans are fixed or adjustable rate loans that you repay over a predetermined period. Home equity lines of credit are open-ended, adjustable-rate revolving loans with a maximum credit limit based on the equity of your home. Home equity loans tend to have lower interest rates than credit cards and other types of personal loans. Interest payments on home equity loans may also be tax-deductible up to a certain extent. Home equity loans and home equity lines of credit use your home as collateral, so make sure you are financially capable of paying the monthly installments if you don’t want run the risk of losing your home.

Credit Cards

A credit card advance or credit card draft from your credit card company can help you drive your dream car home. Like home equity lines of credit, credit card advances or credit card drafts are revolving lines of credit with variable interest rates. To entice existing customers to avail themselves of credit card drafts, credit card companies waive cash-advance fees, guarantee low rates during the initial period of the loan, or offer high credit limits. However, because credit card drafts are unsecured, they generally have higher interest rates than home equity loans, traditional auto loans or dealer loans. Financing your auto purchase through credit cards could also leave you vulnerable to hefty penalty charges if you make a late payment or exceed your credit limit.

As is often the case with financial changes, it remains to be seen how many will be temporary or permanent. But from a practical perspective, commercial borrowers are left with no choice but to adapt to the changing commercial finance environment. Regardless of how long the changes might be kept in place, small business owners must be prepared to operate within a more complicated climate for commercial real estate loans and business financing.

Perhaps the most dramatic change has been a significant reduction in business lending activity overall. This has been due to several events occurring almost simultaneously. Several major commercial lenders have gone out of business altogether. Many banks have stopped business finance lending while continuing consumer lending. Numerous business lenders have enacted stricter standards for the commercial financing transactions they are still willing to consider.

What should commercial borrowers do about this? A primary option that business owners should explore involves looking beyond their local market area for help with commercial real estate financing and other commercial loans. To accomplish this, it should be helpful to contact a working capital financing expert operating throughout the United States.

In addition to fewer business lenders to choose from, there are two other significant changes which must be anticipated by small business owners before seeking new business financing. First, most lenders have cancelled or are about to eliminate unsecured lines of credit for many businesses. Second, commercial lenders are increasingly demanding more collateral for virtually all commercial finance funding.

One effective commercial financing strategy for overcoming the combined obstacles of fewer lenders, more collateral and fewer unsecured credit lines is to consider a business cash advance program based on future credit card processing activity. This is proving to be one of the few sources of commercial funding that has not been adversely impacted by recent events. To learn more, it will be advisable to discuss the potential with a small business financing expert who can provide advice about business cash advances as well as other business finance solutions.

Another key change issue for commercial mortgage loans and working capital loans is simply the likelihood that more changes will be forthcoming in the near future. It is increasingly obvious that many banks will continue to modify their business lending programs in response to changing conditions as they occur.

To adequately prepare for future commercial finance changes that might (or might not) occur is a daunting task for a business owner. A commercial financing expert familiar with Plan B contingency financing for commercial loans will prove to be a valuable resource for any borrower wanting to seriously deal with both current and future changes impacting the financial health of their business.

The net result from business finance changes has been a reduction in commercial lenders as well as stricter standards for acquiring commercial loans and commercial mortgages. Unfortunately there has also been no shortage of misinformation about the availability of commercial funding.

A significant reduction in business lending activity overall is perhaps the most dramatic change. This has been due to several events occurring almost simultaneously. Several major commercial lenders have gone out of business altogether. Even though they have continued consumer lending, many banks have stopped commercial finance lending. Numerous business lenders have enacted stricter standards for the commercial financing transactions they are still willing to consider.

It remains to be seen how many changes will be permanent or temporary. But from a practical perspective, commercial borrowers are left with no choice but to adapt to the changing business finance environment. Business owners must be prepared to operate within a more complicated climate for commercial mortgage loans and small business loans regardless of how long the changes might be kept in place.

What should borrowers do about this? A primary option that business owners should explore involves looking beyond their local market area for help with commercial loans. A commercial financing expert operating throughout the United States should be helpful in improving upon this situation.

In addition to fewer business lenders to choose from, there are two other significant changes which must be anticipated by business owners before seeking new commercial loans. First, commercial lenders are increasingly demanding more collateral for virtually all business finance funding. Second, most lenders have cancelled or are about to eliminate unsecured lines of credit (usually called working capital loans) for many businesses.

Considering a business cash advance program based on future credit card processing transactions is likely to be an effective commercial financing strategy for overcoming the combined obstacles of more collateral, reduced unsecured credit lines and fewer lenders. This is proving to be one of the few sources of business funding that has not been adversely impacted by recent events. It will be productive to discuss the potential with a business finance expert who can provide advice about small business financing solutions including business cash advances and other financial options.

It is increasingly obvious that many banks will continue to modify their business lending programs in response to changing conditions. This means that another key change issue for working capital financing and commercial mortgages is the likelihood that more changes will be forthcoming in the near future.

To adequately prepare for future commercial finance changes that might (or might not) occur is a daunting task for a business owner. A commercial financing expert familiar with Plan B contingency financing for small business loans will prove to be a valuable resource for any borrower wanting to seriously deal with both current and future changes impacting the financial health of their business. By having a candid conversation with a commercial loan expert, business owners should be more capable of implementing an appropriate strategy for the vast changes which have recently occurred or are about to become effective for most business financing and working capital finance funding.

I have been advising business owners for over 25 years, and I have encountered many business financing situations which have involved commercial lenders that I would not recommend as a result. These problematic situations have especially involved commercial mortgage loans, business cash advance situations and unsecured working capital loans. As a direct result of these experiences and daily conversations with other commercial loan professionals, I do in fact believe that there are a number of commercial lenders that should be avoided. This conclusion is typically based on more than one negative experience or an obvious pattern of lending abuses.

I have published many commercial loan articles which are designed to assist commercial borrowers in avoiding business loan problems. One of the most serious business financing situations is a commercial lender that causes business loan problems for their commercial borrowers on a recurring basis. It is particularly this type of commercial lender which prudent commercial borrowers should be prepared to avoid unless viable alternative business financing options do not realistically exist.

Here are a few examples of why certain commercial lenders should be avoided.

BUSINESS FINANCING STRATEGIES AND COMMERCIAL LENDERS TO AVOID EXAMPLE NUMBER 1 – Yes or No?

I have published an article which discusses the tendency of many banks to say “YES” when they mean “NO”. Such banks will typically attach onerous business financing conditions to commercial loans instead of simply declining the loan. Business owners should explore other commercial loan alternatives before accepting business financing terms that put them at a competitive disadvantage.

BUSINESS FINANCING STRATEGIES AND COMMERCIAL LENDERS TO AVOID EXAMPLE NUMBER 2 – The Commercial Appraisal Process

For commercial real estate loans, commercial appraisals are an unavoidable part of the commercial loan underwriting process. The commercial appraisal process is lengthy and expensive, so avoiding commercial lenders which have displayed a pattern of problems and abuses in this area will benefit the commercial borrower by saving them both time and money.

BUSINESS FINANCING STRATEGIES AND COMMERCIAL LENDERS TO AVOID EXAMPLE NUMBER 3 – Think Outside the Bank

In smaller metropolitan markets, it is not unusual for a dominant commercial lender to impose harsher commercial loan terms than would typically be seen in a more competitive commercial financing market. Such commercial lenders routinely take advantage of a relative lack of other commercial lenders in their local market. An appropriate response by commercial borrowers is to seek out non-bank business financing options. It is neither necessary nor wise for commercial borrowers to depend only upon local traditional banks for working capital and business cash advance solutions. For most business financing situations, a non-local and non-bank commercial lender is likely to provide improved commercial financing terms because they are accustomed to competing aggressively with other commercial lenders.

BUSINESS FINANCING STRATEGIES AND COMMERCIAL LENDERS TO AVOID EXAMPLE NUMBER 4 – Meaningless Pre-approvals

Commercial borrowers frequently want a commercial lender to approve their commercial loan at the earliest possible point. The assumed benefit to this early business loan approval is that it will enable the commercial borrower to make other business plans which depend on the business financing being finalized.

Because an ethical commercial lender will treat any form of an approval very seriously, commercial borrowers should expect that a meaningful version of such an approval will not be realistically possible in just two or three days. Nevertheless there are commercial lenders who provide their own special version of a pre-approval within just a few days of receiving preliminary application information. Because this abbreviated approach to pre-approvals almost always produces unexpected surprises for the commercial borrower as the business financing process goes forward, commercial borrowers need to be extremely wary of any commercial lenders that take this approach.

Why do some commercial lenders provide such meaningless pre-approvals? There are two likely reasons. (1) To motivate the commercial borrower to stop considering other potential commercial lenders. (2) To provide a pre-approval that is similar to a structure prevalent with residential mortgage loans. Since many business loans are arranged by residential mortgage brokers who are frequently unfamiliar with common business financing procedures, this reason will be especially applicable when dealing with commercial lenders that specialize in dealing with residential mortgage brokers.

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