3 things to consider during a Business Loan Refinance
Sullivan: Hi everybody Dave Sullivan here, part of the marketing team with People Driven Credit Union and I’ve got an exceptional guest.
Hill: David Hill from commercial lending.
Sullivan: David, we’re delighted to have you here at People Driven. When did you start?
Hill: Fairly recently within the last 90 days.
Sullivan: I wanted to cover what things to consider when getting a commercial loan.
Hill: One of the things is going to be the collateral absolutely when it comes to commercial lending, whether it’s buildings or equipment, the item you have that you’re looking to finance that’s the collateral.
Sullivan: Will there’ll be an appraisal? Like a home mortgage?
Hill: Sure, there’s an appraisal process for building and equipment. Sometimes it’s just the invoice that we’ll consider.
Sullivan: Okay, then the second thing would be income? What should they think about when applying for a commercial loan from an income perspective?
Hill: Yes, so it’s slightly different from a personal loan or something like that. We look at the cash flow of the business. Focusing on sales and the costs of whatever they’re selling. Then the bottom line of what the net income is. We take a look at that if it’s a building if you’re business is in the building, we look at what rent the business owner is paying toward the building, or if they are leasing that building out for an investment property, we look at the rents or the lease agreements. Then we verify the cash flow.
Sullivan: You would recommend if a business owner were in that situation. Where are the business operator and the landlord out of the exact location they should set up a separate company for both?
Hill: Typically, that’s how most people try to do it, and most of that time in it’s important to talk to their financial advisors all the way through, and we can help you through that process. Sometimes it makes a lot of sense to do that for estate planning and protection for legal protection.
Sullivan: What would be a third thing they should consider when getting a commercial loan?
Hill: Well, sometimes when you’re talking about the third thing considered, it’s slightly different on commercial properties because you do environmental studies on them. They can be very encompassing, and other times it’s straightforward. It’s driven typically by the dollar amount as well as location. On the low end is the easiest part. It’s just a simple questionnaire that goes through. Other times if it’s a property that might have some contamination, there might be a couple of additional steps you need to take.
Sullivan: That’s great. What are some advantages to refinancing people’s commercial property now that you’re here? They may have already done some of the other loans they have in their lives. What would be an advantage for them to come here?
Hill: Well, I think one of the significant advantages is you are a member here at People Driven. Unlike a bank or other institutions where you may not be a member, you’re just a customer. At People Driven, you’re an owner. So it’s a whole different process and a real different feeling. In addition to that, we can offer savings from what you’re financing. So coming to People Driven has its advantages.
Hill: We’re a smaller entity, so we are happy to take care of everything and focus on our members. It’s a much more personal interaction.
Sullivan: Absolutely, thank you.