The commercial mortgages are the type of loans which the banks lend by taking the property of commercial purpose as a guarantee or collateral. The basic requirement for the loan is the property that is used for the commercial purpose by the business and the good credit history of the business.
These loans are of two types depending upon the interest rates: the commercial fixed interest rate loans and commercial variable interest rate loans. In the fixed interest loans there is an interest rate that remains fixed through out the loan term while in the variable interest loans the rate of interest differs according to the market trends.
A carefully selected commercial mortgage on the basis of the interest rates, the loan duration and the repayment details provide several benefits to the borrower.
- Most beneficial aspect is the tax benefits which the interest provides.
- The mortgaging does not transfer the ownership of the property to the bank. Hence the property can be used for the business activities and the profits entered to the financial statements.
- With the fund raised from the loan the business expansion can be planned that will result in the growth of the business.
- The property that is financed from such loans can be rented to the other company and continue earning the profits.
- If there is a situation where the property is to be sold to other company then such transfer can be made easily without any reapproval process.
- By availing the fixed rate of interest the business can plan its cash inflow and out flow. Hence the cash management for the company becomes easier if it takes the fixed interest commercial loan.
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