Everything You Need To Know About Commercial Real Estate Financing
Applying for your own real estate loan can seem like an intimidating undertaking, but it doesn’t need to be. It today’s market, lenders and governmental organizations are increasingly focused on helping you develop a successful business. You still have to meet certain criteria, but lenders are willing to work with you to meet them.
In other words, the days of the big, scary bank are gone, replaced by flexible lenders looking for a long-term partnership with your business. Once you find a trustworthy lender, you can build a great relationship to finance everything from commercial real estate to equipment purchases. There are many financing options for buying commercial properties, whether you’re planning on constructing a new building or purchasing an existing location.
How Easy Is It To Qualify for Commercial Real Estate Financing?
The question of complexity depends a lot on the type of loan you’re applying for. Loans backed by the Small Business Administration can take longer to process since you need to submit documents that show your business qualifies under the definition of a “small business.” That said, as long as your company meets the basic criteria, getting approved for these loans isn’t difficult.
To streamline the process, aim to have a great reputation in five main areas: credit rating, liquid capital, business experience, profitability, and personal net worth. Having valuable assets such as inventory or business equipment can help. However, you don’t need a perfect credit score or decades in business. Even companies with average credit (above 600) can get approved. The better your performance in these five factors, the lower your interest rate.
What Factors Should You Consider For Choosing the Right Loan?
Before you sign on the dotted line, make sure to check the agreement for specifics. Of course, above all, you want to find a friendly, trustworthy, and knowledgeable financing team to work with. This type of lender is valuable because financial experts take the time to explain unfamiliar terms or walk you through important steps.
Ask whether the loan in question has any prepayment penalties, which take away some of the flexibility you have. Non-recourse loans may have stricter qualification requirements, but they come with the benefit of not risking your personal or business assets at all, only the property in question.
What Real Estate Loans Are Available?
There are many options for buying commercial real estate. You can choose a traditional commercial mortgage, with large loan amounts and generous repayment terms. Small business owners can take advantage of the versatile SBA 7(a) loan or the more specific SBA 504 loan, which is only for purchasing real estate but doesn’t have an upward limit.