Top Exec Blog (Web Log)

In general terms, for both commercial loans and residential mortgages, one of the first questions a prospective borrower asks is "What's the rate?" on his/her loan. Am I right?

So, I'm here to tell you: Don't operate from that line of reasoning! Don't focus on the rate, and don't get boxed into shopping for a loan by worrying most about interest rates.

First of all, for commercial loans, the property and the borrower have to qualify for a loan and an interest rate and a monthly payment.

Second, if the property is an income-producing (commercial) property, then it has to support itself as a rent-paying, income-generating, profit-making property, right?

So, if you follow the logic, that means that it's the PAYMENT (per month) that should be the focus of a borrower's request, since the CASH FLOW of the property (monthly income minus expenses) has to be POSITIVE for most businesses to keep functioning, right? And if the borrower qualifies for a commercial loan that allows him/her to have a payment (Principal & Interest, let's say) that's tailored to his/her CASH FLOW and PROFIT NEEDS, then that loan has made him/her a better business person with a PAYMENT that fits his/her business needs. Add to that the benefits of paying a mortgage (tax deductions, write-offs, etc.) vs. paying rent, and she/he's going to feel a lot more positive about that particular commercial loan offering. So, focus on the payment.

Remember, it's not the rate --- it's the payment and how that payment fits the cash flow (more cash flow usually equates to more profit, or at least more money in the pockets) to make the borrower more money. Simple, no? Care to comment?

© Daniel A. Cabrera/Top Exec Funding, LLC. 2007, All Rights Reserved.