Forums: Discussions for entrepreneurs and small business.

You`re right, the established record will help you show that you know what you`re doing vs. everything being based solely on projections.  I`m a Commercial Lender in the Midwest and think that you`re on the right track.  Typically a residential mortgage loan isn`t possible on property that`s zoned as commercial but if you`re looking at options A or C, the property may be zoned residential and don`t discount a residential mortgage because of income concerns.  There are many programs out there that cater to business people in your situation.  If you go that route, talk both with your local bankers as well as a larger competitor that you might find online.  Local bankers don`t always offer all of the same programs that national lenders may. 

If you go with a property that`s zoned commercial, you`ll need a commercial loan but you probably want to purchase it in your personal name as there may be property tax benefits and/or you have the ability to pay yourself rent and take advantage of personal tax benefits.  Don`t expect the same type of terms with a commercial loan as a residential mortgage, typical terms are a 5 year balloon with a payment based on 15 - 25 years (vs. a 30 yr fixed rate or longer residential loan).  In five years you`ll have to refinance at whatever the rates are then...  Still, not a bad way to go.

If you go the commercial loan route, talk with several bankers.  Credit Unions are able to do commercial loans now but only for the past 3 years or so.  Many don`t have much experience and that could be a good or bad thing for you.  As opposed to a residential loan, I don`t recommmend looking at national lenders for commercial loans.  Your commercial banker should be someone that you can build a relationship with and that can get to know you as well. 

Good luck!

dberes - Thank you for that wonderful information! I really appreciate it. I`m going to print your post and keep it in my file for future reference. Thanks!!!!

You should speak with your local bank/commercial lender that you have a relationship with.  As a residential mortgage loan officer,  your 2 years in business will allow your income to be used, however - we would look at your `net` income, which usually represents a much lower income with all the deductions.  If you have decent credit, you will be able to do a `stated income` loan, which means you will not be required to prove income.   You bigger obstacle will be with the `collateral` or home you intend to purchase.  Being zoned commercial or at least mixed-use will drive up the cost of the mortgage and limit the programs available to you. Even having multiple dwellings on one lot reduces the programs available for standard residential mortgages.  I recently had a difficult time refinancing a woman who had her hair salon located on her property.  She converted her detached garage into her hair salon.  Along with the property not being compliant with the zoning, the programs available to her were limited.   That doesn`t mean these programs do not exist, they do.  I believe your first stop should be with the bank the you have your business account with.   Best of luck.

 

Thanks Gags. That is really helpful! I guess in some ways you win and in some ways you lose. I`m still open to renting or buying a commercial property separate from the house, but I`d really prefer to be with my kids and close to home. I`m going to start the process in a couple of weeks and see what happens. Thanks again!

You might consider venture capital ... if you`re comfortable with that idea. You do have a great track record, you have sales, and you have visibility. Your idea might appeal to food companies, who often have their own venture capital funds available. Just a few suggestions.

Thanks CookieM. From what I understand, with VC they expect you to sell your business in about 7 years. If it is attached to my home, I really don`t want to do that. Also, VCs want your business to be a LLC, and I`m an S-corp. I`m just not comfortable with VC anyway. I`d rather go through a traditional lender if possible - but who knows. This could change.