Because most private mortgage lending terms are for a period of one year, this automatically means that a longer term solution is going to be required to payout the private mortgage, provided that the owner wishes to retain the property into the future and isn’t coming into enough cash within the time period of the private mortgage to retire it with internal sources of funds.
In many cases, once the private mortgage is put into place to deal with whatever short term financing issues that needed to be solved, the business owner or manager tends to relax thinking that they now have ample time to locate and secure a long term bank or institutional mortgage before the one year term is up.
With commercial property financing scenarios, a year can go by very quickly and you still can be strapped for time trying to find the right institutional deal.
What we recommend with our clients is to allow us to complete step one, which is the placement of the private commercial mortgage, and then engage us to immediately start working on the long term commercial mortgage.
In this way, there is going to be some continuity in the effort for looking for financing, and if we can get something in place sooner than later, then we may be able to pay out the private mortgage without any prepayment penalty, depending on how the mortgage is written, saving you the higher cost of interest that is going to come with most private mortgages.
Attacking the process of getting ultimately getting long term commercial mortgage financing in place as a two step process such as what I have described above not only increases the probability of you getting a solid commercial mortgage in place, but also that the financing process for both step one and step two can be completed within the time period you have to work with which will eliminate any penalties or late fees associated with delays in getting everything in place.
There is also the element of critical mass with a business financing search that should not be underestimated either. If you shut down the process for looking for the long term commercial mortgage solution once the private mortgage is in place, it can be difficult to get the process going again and inevitably the restart happens too close to the end of the private mortgage term which can create a whole new set up problems and costs if the long term mortgage placement drags on.
If you would like to discuss how we can help you with this two step process, I suggest that you give me a call and we’ll go over your situation with you as well as different approaches to getting both steps of the commercial property financing requirement completed.