Buying commercial real estate for the first time is one of the most exciting yet stressful experiences you will endure. While you want to keep the excitement, you could use less stress. One way to reduce your stress is to ensure you get the best rate possible on your new loan. Here are some tips to help you navigate that process.Â
The Property
The commercial real estate you’re purchasing could impact your rate. While it may not seem fair, the location you choose could have some bearing on your lender’s decision. The riskier the location is perceived to be, the less favorable your rate may be.
Generally, lenders like large urban areas. Rural areas come with more risk because it’s more difficult to keep them occupied. Sometimes it can’t be helped, but you may fare better choosing a more populated area versus a small town.
The condition of the property will also be a factor. A lender is not likely to put their money behind a property that needs a lot of work. Remember, if you default on the loan, they get stuck with the property. They’ll always be mindful of how quickly they can flip the property if it becomes solely theirs.
Your Finances
The longer you’ve been in business, the easier it will be to secure a commercial real estate loan. That is if your business has had success.
The lender is going to look at your cash flow, your income to debt ratio, your credit score, your business’s credit score, and your down payment to help them determine whether or not you are creditworthy. The more creditworthy you look on paper, the better rate you’ll be able to secure.
The Process
Get everything ready before you apply. You may end up applying through several different lenders in order to find the best offer. You’ll need quick access to
- your tax returns
- profit and loss statements
- bank statements
- real estate appraisal
- updated business plan
Having all these documents handy the day you meet with your lender can speed up the approval process.Â
Purchasing commercial real estate is a process and it can be a lengthy one. Finding the right property and having your ducks in a row can help eliminate some of the stress. Be sure it’s a property that not only you would want, but that the bank would want. Also, make sure it’s the right time for your business, as your documents will reflect.
