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5 Ways a Commercial Mortgage Can Work for a Borrower’s Small Business

Commercial Mortgage
Posted on 
July 24, 2023

When it comes to financing a company’s business endeavors, a commercial mortgage can be a powerful tool. Whether they’re a new business owner looking to start a new endeavor or an established business looking to expand, securing a commercial mortgage can provide the funds to turn a dream into reality.

Here are 5 ways a commercial mortgage can create financial opportunities for your small business borrowers:

1. Real Estate Ownership

The most apparent use of a commercial mortgage is the opportunity to become a property owner (or become a property owner again). Renting commercial space can be a substantial expense for small businesses, and there’s a good chance that over time the cumulative rental payments may outweigh the cost of owning a property. By securing a commercial mortgage, borrowers can invest in a property that suits their business needs, build equity, and potentially benefit from appreciation in the property's value over time. In addition, owning commercial real estate can provide stability and financial security for the business in the long run.

2. Capital for Business Growth

One of the primary reasons why borrowers seek a commercial mortgage is to access capital for business growth. Whether they plan to expand their existing operations, open a new location, or invest in equipment or inventory, a commercial mortgage can provide the funds required. Unlike other financing options, such as short-term loans or lines of credit, a commercial mortgage typically offers higher borrowing limits and longer repayment terms, enabling borrowers to fund substantial growth initiatives without straining their cash flow.

3. Tax Benefits

Commercial mortgages often come with attractive tax benefits, which can significantly impact a borrower's financial position. For example, interest payments on the mortgage are usually tax-deductible, reducing the overall tax liability for the business. In addition, borrowers may also be eligible for depreciation deductions on the property, further lowering their taxable income. These tax advantages can provide a substantial financial benefit and increase the cash flow available for business operations or expansion.

4. Flexibility in Repayment

Commercial mortgages offer borrowers flexibility in repayment options. Lenders understand that businesses may have fluctuating revenue streams, and they structure mortgage payments accordingly. Depending on their unique circumstances and financial goals, borrowers can choose from various repayment schedules, such as fixed-rate mortgages, adjustable-rate mortgages, or interest-only options. This flexibility allows businesses to align their mortgage payments with their cash flow, ensuring they can comfortably meet their obligations while continuing to grow and invest in their operations.

5. Lower Interest Rates

While commercial loan rates might be slightly higher than residential rates, compared to other forms of financing, such as unsecured business loans or credit lines, commercial mortgages generally offer lower interest rates. The collateral the property provides reduces the lender's risk, resulting in more favorable loan terms for the borrower. Lower interest rates, and lower monthly payments, can give a small business the opportunity to allocate more of their revenue towards operational needs or savings for future investments. Additionally, the long-term nature of commercial mortgages ensures stable interest rates over the loan's duration, shielding borrowers from potential interest rate fluctuations.

It's easy to see how a commercial mortgage can be a game-changer for small businesses in need of funding for growth and expansion. From providing capital for business development to enabling property ownership and offering tax benefits, the advantages of securing a commercial mortgage are numerous. Plus, the flexibility in repayment options and lower interest rates make it an attractive financing solution for borrowers.

When potential commercial borrowers work with Apex Commercial Capital, the borrowers should always include why they’re looking for a loan and what financial goals they hope to achieve. Once you’ve carefully assessed your borrower’s current financial situation and upcoming business plans, we can determine the mortgage option that best fits their needs and objectives. With proper planning and strategic decision-making, a commercial mortgage can become a catalyst for success, helping a business achieve its goals and secure a profitable future.

Apex Commercial Capital is a full-service lender focused on providing commercial mortgages and equipment financing to small businesses. We look beyond the numbers to understand each business owner's objectives and how we can work together to achieve them. Call (800) 262-APEX today to talk with our team of small business mortgage specialists.


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