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Things to know about refinancing commercial real estate

There are several reasons for wanting to refinance a commercial mortgage on commercial real estate. Securing the best financing and the right financing is important, so it is necessary to be familiar with the options available.

It can be useful to first evaluate what one is wishing to refinance. When seeking to make improvements and need cash, a fixed-rate loan may be a better option because it allows for better cash flow predictions. When wishing to avoid a balloon payment coming due, the party refinancing likely needs to refinance into a new loan that helps avoid the large payment.

As is commonly true when making commercial real estate decisions, it is always important to carefully think out the long-term goals for the business or business move. Clearly understanding long-term goals can help guide decisions to choose the best loan product and determine if refinancing is a cost effective option. When preparing to refinance, it is necessary to prepare documents, including tax returns, balance sheets, profit and loss statements, projected cash flow for the project being refinanced and oftentimes, a business plan will also be required.

It is also important to be familiar with the valuation of the property seeking to be refinanced. Calculations concerning monthly income should also be made to determine if it will cover the refinanced payment amount each month.

It is also helpful to be aware of the potential impact of credit and what the costs and fees associated with refinancing will be. Financing is always a significant concern for any business or commercial real estate project, which is why understanding options, how they work and how they apply to particular situations is always important.

As is true of most commercial real estate concerns, including refinancing commercial real estate, the details can be complex, which is why understanding the process and knowing what to expect is always important. Having proper guidance, and knowing how to handle what comes next, can be helpful to secure the best loan refinancing option available.

Source: Chron.com, "How to Refinance a Commercial Mortgage," Beth Winston, accessed on Nov. 14, 2016

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