A wrap around loan allows you to purchase property without having to qualify for a loan. This can save time, and also the hassle of getting denied for business financing. The seller, known as the lender in this case, will sell you the property for an agreed upon amount. You will pay the seller that amount as a fixed monthly payment which includes interest charged by the seller.
The amount that is to be paid to the seller includes what is owed on the loan and the equity accrued on that property. The seller, or lender, makes extra money by charging a higher interest rate than what they currently are paying. Upon receiving the payment the lender will turn around and pay on the loan.
In order to properly use a Wrap Around Loan, there must be no due on sale clause on the property. You can’t obtain financing this way, if there is a due on sale clause. It means that the loan is due upon sale to the lender of the initial loan. The seller would have to pay the loan off in full. It is important to be careful because if you are attempting to get this sort of property you could be forced out of the property if there is this clause because the lender would have to sell it.
A Wrap Around Loan can be a benefit to you in obtaining instant financing for a particular piece of commercial property. Make sure you get legal assistance before going this route, but it can be beneficial to your business.