A lot of people consider taking out commercial loans to realize their dreams of owning a business. Whether they are thinking of purchasing land or real estate to start their own restaurant, bed-and-breakfast, souvenir store, or tech startup, they try hard to get the funds needed so they can be closer to achieving their goals.
If you long to start your own business but need help financially, you can find Commercial property lending companies or private commercial real estate lenders in your area to help you out. Commercial property lending companies or private commercial real estate lenders have an application process that you have to complete before you can get approved. Below are some important things to know to make the application process easier and increase your chances of approval:
Requirements to prepare and submit
To be considered for a commercial loan, a commercial property lender will need you to submit various financial documents. They will usually take a look at three things: your business finances, your personal finances, and your property characteristics. They will want to know if you have encountered financial difficulties before, such as foreclosures, court judgments, and defaults. They’ll also want to verify what your personal credit score is. If you have a low score, your chances of approval can be improved with the use of a cosigner. These lenders want to make sure that you are capable of repaying the loan.
The requirements to apply for a commercial loan vary per lender, but they usually include the following:
- Your financial reports, records, books
- Your bank statements from the last few months to a year
- Your business tax returns
- Detailed documentation of collateral
- Property appraisal conducted by a third-party
- Your business plan
Ways to increase your chances of loan approval
Even though you have provided sufficient documentation for your commercial real estate loan, there is no guarantee that you’ll be approved. There might be things from your past business endeavors or your current financial status that the lender might see as a negative. So, to improve your chances, below are a few things you should do:
- Pay off all of your existing debts.
- Increase your credit score by paying your bills on time, etc.
- Add a cosigner or investor.
- Pick a less expensive property.
- Agree to a larger amount for your down payment or pay a higher interest rate.
Pros and cons of commercial property lenders
Choosing a commercial property lender over a bank has some pros and cons. Take a look below to find out what they are to help you make a decision that is right for you.
- They have less strict standards.
- Their fees are generally lower.
- They can process your application faster.
- They often offer higher interest rates.They may ask for a balloon payment, i.e. lump sum that is much higher than all of the fixed payments paid at the end of your loan’s term.