When planning to develop commercial real estate, it can be difficult to overcome the financial hurdles that come with starting a business unless you possess a lot of cash up front. Fortunately, commercial mortgage loans make it possible for many business owners and investors to obtain the funding needed to get the job done. A commercial mortgage loan is a loan created specifically for purchases of real estate that will be used to produce an income. The real estate might be used to build new offices, hotels, or other establishments, to buy an existing business building, to develop properties for rental or investment purposes, or to extend an existing property.
Steps to Approval
Applying for a commercial mortgage loan is simple; getting approved is the tough part. Lenders usually require a positive business and/or personal credit rating, a business plan or proof that your existing business is profitable and stable, and a positive debt/income ratio, which demonstrates that there’s enough cash available to cover your monthly payments. Standard commercial mortgage loan requirements include personal financial statements with a list of personal assets, personal and/or business tax returns for the past few years, and details about any collateral available to secure the loan.
If you need a commercial mortgage loan and have less than perfect credit, or limited collateral or cash in hand, there are non-traditional commercial lenders such as private lenders that can help even when major lenders turn down your loan. There are also private equity firms and wealthy individual investors that are sometimes willing to lend money in more risky situations.
Non-traditional funding sources are able to offer assistance because they’re not tied directly to the main credit scene. They are portfolio lenders, meaning they will hold on to your loan rather than sell it. They are able to lend money even during a credit crisis because, unlike banks, they are cash rich and are not dependent on the credit markets for liquidity.
A pre-approval may take place before your final approval. Though the pre-approval is not “final” it does give you and the lender an idea of where you stand in terms of credit and how the lender views your situation. The final approval process may take several days, weeks, or even months depending on how quickly you can gather all information needed.
The key to getting an approval (and getting it quickly) is to study the process of loan approval beforehand and be sure to have all your necessary documents and information ready. Make copies of all your documents, tax returns, business plan, etc. If offering collateral such as land or developed property, be sure to have a copy of the deed on hand as well as an appraisal (if available). Place these documents in a business envelope and be ready to present whatever documents are needed when asked. Also, be prepared for closing costs and other expenses that may come up throughout the process.
If you need help with your commercial real estate loan, speak with a loan broker for advice. A loan broker can help you find the lender that’s right for your needs. The broker will also determine the fees along with terms and conditions from various lenders to help you make the best decision.
There are loan brokers online to help you through the entire commercial mortgage loan process. Get started today to realize your business dreams!