Becoming familiar with the process of obtaining a commercial real estate loan can reduce stress and give you a better chance of having the loan approved. Following a few simple steps greatly enhances your chances of qualifying for a commercial real estate loan.
Adequate Cash on Hand
One of the first things to do before applying for a commercial real estate loan is determine whether you have adequate cash on hand. This goes beyond the down payment; will you have enough cash to operate the business once the property has been purchased? When it comes to the down payment, be sure that you have between 20% and 30% of the purchase price on-hand when you apply for the loan. Once you have applied, be prepared to demonstrate that you will have the cash available to maintain the property once the purchase has been finalized
Know Your Credit Scores
As with any loan process, having excellent credit is crucial to obtaining the best loan rates. However, because commercial real estate loans are normally larger than a residential mortgage, lenders have more stringent credit requirements for approving commercial real estate loans. In most cases, the principals of the company must have credit scores above 700 to qualify for a commercial real estate loan and the company itself must have a proven track record of paying its bills on time and managing its finances responsibly.
An important document to have when applying for a commercial real estate loan is a business plan. A business plan outlines what you envision for as the future of the business, how you plan for the business to succeed and what your experience is in this type of business. If you are planning to open a retail store, it is important that you have some type of demonstrated retail management experience to present to the bank or the lender will be hesitant to invest in the commercial real estate for your business.
Of all the tips for obtaining a commercial real estate loan, one of the best suggestions is to use a local familiar lender. Local bankers who live and work in the communities they serve are more familiar with the area where your business will be located and are often able to provide valuable insight into how to help your business grow. To learn more about the advantages of securing your commercial real estate loan with a Texas bank that is dedicated to the economic vitality of your community, click here!