It’s true that in any economy banks plays an important role. They tend to regulate the economy of a country. They grants different loans to different borrowers based on their requirement. However a borrower seeking a commercial mortgage loan can go to a non-bank financial institute for the loan rather than approaching a Bank. In many cases, banks decline the loan applications are they do not find the concerns worthy enough to be granted a commercial loan. Apart from this there are many other reasons why you can approach a non-banking concern for getting commercial loan.
Most of the banks charge from the borrowers an up-front commitment fee. However a non-bank institution would not charge such fee for granting any type of mortgage.
For a commercial mortgage, most Banks will require a business plan. Preparation of a business Plan also requires quite an amount of funding. However, non- bank business lenders generally do not ask for any business plan while underwriting a commercial real estate loan.
You need to furnish proper tax returns documents to a Bank during the application process. If they do not take the tax return they would ask to sign some form as per their country norms. But a non-banking financial institute would not ask for the tax return, neither would they require you to sign a form.
Unlike Banks, a non-banking financial institute would not require cross collateralization of private property. Hence, your private property remains safe.
Many banks are not showing interest in providing commercial loan in properties such as auto service business, bars/restaurants, funeral homes. While there are no such declination from the non-banking lenders for these types of commercial property.
The minimum amount limit which can be granted by a bank for a commercial loan is much higher than that granted by a non- banking finance institution. Thus if require a lesser amount then taking loan from a non-banking institute would be better.
Most of the Banks will need from 3 to 9 months to close a commercial loan. The processing period is much shorter in non-banking financial institute. They try to close a deal within 45 to 55 days.
There are strict guidelines by different banks for “seasoning” or “sourcing” of assets while a non-banking financial institute is not that strict for such matter.
Many banks would ask for income verifications or audit reports even after the commercial loan closes. A non-banking Financing institute will not verify such documents either before or after closing the loan procedure.
Thus, when going for a commercial mortgage, borrowers have to find out a company that offers the best deal in the market. Entrepreneurs looking for a loan to start a business but not in possession of the proper documents can opt for a non- banking financial institute. However, it’s true that Banks are considered much safer.