Need financing advice


#1

I am new to all of this but have been purchasing educational materials and am looking forward to getting started. I am fortunate to be 50% owner of a small older building in Northern KY. I am planning on using this as collateral to get started. I am looking for a finance company that works well with newbies and has decent rates. I would also like to use some of the borrowed money to consolidate on some personal debt. Any suggestions? Thanks!


#2

Hi Adikan,

If you are looking to get commercial financing and pay personal debt with it you may need to reconsider your approach. Commercial loan documents are different than residential loan documents in several ways. More importantly for yourself, if you disclose that you plan to use proceeds from a commercial loan for personal purposes then you are not really getting a commercial loan. Many commercial lenders will not consider your request. The main reason is that commercial finance is regulated differently than residential finance. Once the purpose of your loan becomes personal instead of business, then lenders need to follow residential lending guidelines and regulations.

e.g. Residential loan requires good faith estimates and other disclosures whereas commercial loans do not.

It’s tough to explain without going into too much jargon, but bottom line is that the commercial lenders are set up to do commercial transactions. Once your intentions are personal, you essentially redefine the transaction type. Commercial mortgage is against a property being used for business purposes.

You can learn more about these practices and nuances on the Federal Trade Commission’s website.

Now apart from all that… There are programs out there that allow you to use borrowed money (typically has to be secured against real estate) as down payment. If you have any questions, I would be more than happy to help you out. Commercial is a tough ball game to get used to, but with the help and support of others with experience (as I’m sure you have found on this site already) you can overcome and succeed in this business.