Securing a commercial real estate loan can be difficult. You have to find the right lender, you need detailed financial statements, and it’s often hard to get loans for large amounts of money. However, if you follow these eight tips, securing your first commercial real estate loan will become much easier!
1) Have a Strong Credit
Banks look at your credit score as one of the most important factors when deciding whether to approve or deny a loan. Make sure yours is in good standing, and check with your lender to see if there are any changes that need to be made before applying for financing.
2) Have an Established Business History
Commercial loans usually require collateral from the borrower’s company or personal assets such as stocks, bonds, or cash on hand. The more years of successful business ownership you have behind you, the more likely you’ll be able to secure a loan.
If your company is new or has been struggling, consider having an experienced business partner as well as other collateral such as real estate and equipment.
You should also make sure that your tax returns show steady profits throughout the years, which will further help prove your ability to repay the loan on time!
3) Have Proof of Income
Proof of income is another important factor that lenders consider when making their decision. You can show this by earning steady profits on your tax returns, having a consistent cash flow in your business bank account, and including recent pay stubs with your loan application.
There are a few things you can do to prove your income is stable enough for commercial loan repayment purposes. First, open up a business checking account and deposit your income into it, so you have evidence of funds coming in. Second, provide the lender with financial statements or tax returns that show steady profits for at least five years, demonstrating additional proof; of ability to repay!
4) Arrange for an Independent Appraisal
A commercial real estate loan typically requires an assessment of the property that you wish to purchase. In most cases, this will be completed by a third-party appraiser not affiliated with your lender, as they can provide unbiased information about the value of the asset being purchased.
5) Have a Complete Loan Package
You need to have all of your paperwork ready when applying for commercial financing. This includes financial statements, business plans, tax documents, and any other documentation that will prove you’re capable of repaying the debt on time!
6) Have Certification of Corporation or LLC
To ease the process of getting a commercial loan, you should have your company’s certification available to show that it is a legitimate business entity.
7) Have a Firm Plan
To secure commercial financing, you need to have a solid business plan showing how the money will be used and what benefits it’ll bring your organization. You should also show evidence of why now is the perfect time for this loan, so all parties involved know precisely when repayment needs to happen!
8) Have Projected Profits Throughout the Lifespan of the Loan
Banks are in the business of making money, so they’ll want to see proof that your commercial real estate financing will be bringing them profit.