Pennsylvania Commercial Mortgages

Some of the issues to consider when looking for a commercial business loan include what the borrower needs the money for, how long it will be needed, and obviously, whether the business can make the monthly payments. Loans are based on a series of standard ratios, including the ratio of the loan to the value of the collateral--which can be property, tangible assets, or receivables.

In addition, Pennsylvania commercial mortgage lenders will look at the borrower's commercial debt service ratio which is defined as the net operating income (NOI) divided by the total debt service. Total debt service consists of the periodic/monthly repayment amount that includes both principle and interest. Lenders want to see the highest possible Debt Service Coverage Ratio, while borrowers usually want a lower one because it means more operating capital.

Borrower's Options

Borrowers can choose to request a commercial loan from a bank, a direct mortgage lender, or a commercial mortgage broker. A bank can make a commercial loan, but its overhead may be high. A major direct mortgage lender may be a good choice because of the amount of money the company has to lend. Finally, a Pennsylvania commercial mortgage broker who regularly makes a number of mortgages each month for several different lenders may know a lender who will be able to help a borrower get a loan even if the borrower's numbers are less than perfect.

In order to get the best possible loan, the borrower must get quotes from at least three or four lenders or brokers and should compare the total cost of each offer. Lenders can be found through the Pennsylvania Mortgage Brokers Association. It is extremely beneficial for the borrower to be prepared with a great business plan, tax information for at least three years, personal financial statements, and cash-flow projections for at least the next 12 months.