How To Get Financing for Commercial Real Estate

Commercial real estate can be an excellent tool for increasing your business reputation and expanding operations. With your own commercial property, you have space for production, customer service, warehousing, and other business needs. If you make your living by renting or fixing up investment properties, real estate financing is essential for success. How can you get the right loan? Here are seven steps to follow:

Take Care of Your Credit

The first step to buying a commercial property actually begins long before you ever apply for a loan. You need to build a solid credit history that banks can trust. This means being careful to avoid debt and paying back other loans or credit cards quickly and responsibly. Your personal credit also has an impact, so make sure to aim for the best credit rating possible at all times.

Understand Your Business Financials

Lenders ask a lot of questions before extending real estate loans, mainly because they have to assume a large amount of risk. To be able to answer convincingly, you need to understand how your company’s cash flow works. That includes assets, profit-and-loss statements, taxes, and financial records.

Perform a Property Appraisal

Once you find a good commercial property you like, the next step is to request an appraisal. Lenders can’t move forward with a loan until they know exactly how much the real estate is worth. That determines factors such as loan-to-value ratio.

Present a Convincing Proposal

Approach a loan application as if it were a business proposal. You’re not just requesting financing; you need to show why you need it, how it benefits your company, how you’re planning on using the real estate and what steps you’ve taken to guarantee you can repay the loan. The better your presentation, the more likely you’ll get approved.

Take-Along Sufficient Documentation

Words are good, but hard data is even better. Show lenders your tax returns, company banks statements, bank accounts, and other assets, and other related financial records.

Ask Questions

There’s nothing wrong with asking questions when applying for a loan. It’s important to know what’s expected of your company. You need to know how much payments will be, the LTV of the loan, how interest is calculated, how much the down payment is and what the terms will be.

Work With Commercial Real Estate Industry Professionals

Finding a bank you trust is important for success in commercial real estate loans. Alternate or private lenders may have relaxed credit score requirements and other flexible options. In addition, it can be a good idea to speak with real estate attorneys or mortgage professionals with experience in commercial properties. That way you get the best terms for a healthy business.


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