What Is a Business Mortgage?

A business mortgage is a type of commercial loan that provides the funding for the purchase of commercial business space. Both small and large businesses may seek to secure commercial mortgages that allow them to own the location of their operations, rather than establishing long-term leases for those spaces. The terms associated with a business mortgage will vary, based on the type of property involved, the duration of the loan, and the credit-worthiness of the business owner.

One of the chief benefits of the business mortgage is that the owner of the commercial operation has the ability to build equity in the asset over time. In the interim, it is not unusual for the business to enjoy tax breaks extended by both local and national tax agencies. Additional incentives to buy land and build commercial properties may also be extended by local municipalities, since doing so helps to create jobs in the local area and help to improve the economy in the general area.

The particulars of a business mortgage may vary, based on the loan amount and the prospects for the business to be able to manage the mortgage debt over the long term. Typically, lenders will look at the current credit status of the business, along with the credit scores of the owners or sole proprietors. Attention will also be paid to the potential of the business to maintain and even expand its client base over the duration of the mortgage. More favorable circumstances translate into lower risk for lenders, who in turn are more likely to approve the loan application and provide a competitive rate of interest.

As with any type of mortgage arrangement, businesses should take the time to compare several offers from different lenders. Lenders who specialize in underwriting commercial mortgages are always a good place to begin. Depending on the location, other institutions such as banks or credit unions may also provide excellent terms and conditions that include waiving certain fees or deferring closing costs as additional incentives. Taking the time to delve into the specifics of any business mortgage arrangement will make it easier to identify any fees or charges that may be assessed throughout the life of the agreement, and project the total amount the business will pay over time.