This kind of loan specifically answers to the need of housing realty agents for a quick source of cash to be used for certain purposes such as an emergence of an unaccounted bill or for medical purposes. Since commissions are paid after the waiting period of 60-90 days after a sale is closed, for most agents this can be a long waiting period. Within this waiting period, there could be situations that the agent would badly need the money and a financial resource is nowhere to be seen except the commission that is to mature at certain period of time.
This loan then is the answer for agents who need their hard-earned money at a shorter period of time. All the agent needs to do is apply for a loan wherein the requirements are some documents relating to the closed sale like sale contract and other documents required by the lender. Typically, a lender would allow about 80%-90% of the value of the total sales commission to be lent to the agent. Once approved, the amount borrowed can be directly deposited to the realtor's bank account. Upon the maturity of the commission or upon the payment of the commission, this would be directly deposited to the lender's account as this would act as a payment for the amount that was borrowed through this loan.
Typically, this loan acts as a financial facility of an agent in case they need money for emergency purposes. But this loan can also be used for other purposes such as reinvestment of the commission for operational purposes that involve marketing or sales tactics that could boost sales and this could also be used to control cash flow within the business, thereby having a sound financial management of the business.
As a conclusion, commission loans are very helpful to individuals who rely on commissions as their sources of income. Since commissions are paid several months after a deal is closed, the amount that is advanced in this type of loan would be very helpful to the agent in the management of his or her finances on the long run.
To summarize the above article, this type of loan is:
- A financial facility that agents can use without them having to wait for their commissions to be paid.
- About 80%-90% of the expected amount of commission can be borrowed or lent to the agent.
- The requirements are simple such as contract sales and other documents needed by the lender as a proof that a commission will be paid in the name of the borrower.
- Can also be used for other purposes such as reinvestment of the commission for operational purposes of the business