A commercial second mortgage can serve as a great financial vehicle for businesses looking to expand and grow. Unfortunately a lot of businesses use it as a “bail out” to get the finances they need to survive through tough times. Whilst it is a way of getting quick cash, its by no means an easy option or a cost effective loan in any way.
A commercial second mortgage is expensive. The main benefit is getting financing quickly and getting it without the usual struggles that comes with getting more traditional loans. All businesses go though cash flow cycles and when a business with a good financial record and a lot of future potential hit a speed bump, they need the financing that can see them though the tough time. The question is then whether a commercial second mortgage is a viable option?
Lenders love these types of mortgages simply because they carry little risk and they get their money and their interest back very quickly. For you this is the downside since you have to pay back the mortgage very quickly and the repayments tend to be quite heavy. You need to make sure that this makes sound financial sense for you and that you will get enough return on the investment to be able to justify this second mortgage.
Another important consideration is the fact that you are putting your business at risk when you get a commercial second mortgage. It’s a mortgage against your existing business and if it all goes pear shaped then you can damage your business’ long term financial future. In these tough times it can be a risky bet. We all need some financial help to steer us into better times, but the future is still a little uncertain and who knows when things are going to pick up again?
I would suggest that you only get a commercial second mortgage if you have a thriving business and you are looking for the capital to grow and expand your business. Don’t use it as a means of survival. It will burn your fingers and the heavy re-payments can catch up with you really quickly.
