One financing solution often favored by professional real estate investors is a commercial real estate or commercial property loan. This loan is generally used to purchase or renovate a commercial property. You can easily find commercial lending for real estate from different sources like commercial lenders, banks, and hard-money lenders. Where you wish to apply for your loan is totally up to you, but if you want a higher chance of getting approval, there are a few things that you, as the real estate investor, must consider.
Approval for a Commercial Real Estate Loan
A commercial mortgage is quite similar to a residential mortgage. The only difference is that your lender will ask for more documentation and requirements from all business owners looking to get commercial lending for real estate. Your business must occupy at least half of the real estate to qualify. In some instances, they may even require the property to be occupied by the owner or the applicant.Â
Other lenders may also decide to give you a loan depending on factors like your business earnings and credit score. As commercial lending for real estate explains, credit scores help lenders understand how a business or an individual investor handles their money. It’s a critical figure that can help decrease or increase your chances of getting approval for a commercial real estate loan, especially when you hope to get the lowest interest rates possible. Let’s look at some essential tips to help you get your commercial real estate loan approval.
Preparing All Documents and Requirements
The process for commercial lending for real estate is slow and often requires you to gather comprehensive documents. If you have decided to go for it, prepare all the documents you need ahead of time. Our professionals believe that banks and lenders typically ask for tax returns of your business, a business plan, bank statements (for the past three months), collateral information, financial reports, and an appraisal of the real estate you wish to purchase.
Some lenders may even ask you to submit more documents in addition to all these. Others may only ask for a few requirements, for example, a hard-money loan which you can get from an individual or a company and not from a bank. Remember that while these loans may be faster and come with much fewer requirements, they may cost you much more in terms of interest and other loan-related fees.
Pay All Your Existing Debts
If you don’t have a strong credit standing, the lender can decline your loan. Obstacles like this are generally for businesses and people with many existing debts. If you wish to increase your chances of getting approval for a commercial real estate loan, consider paying off all your current debts. By doing so, you can quickly improve your overall credit score and easily qualify for a loan.
Additional Collateral
One of the traditional requirements of a commercial real estate loan is collateral. However, if you wish to improve your approval rate, you can add additional collateral to your lenders, like a property or an asset you own. So, if you have assets with a high value, consider pledging them as extra collateral to try and increase your chances of getting approval.
Add an Investor or Co-Signer
If you do not have any more assets you can put down as collateral, you can boost your chances of approval by looking for a co-signer or an investor for the loan. It can be your business partner, a close friend, or a family member willing to sign the loan application with you.
Save For A Larger Down Payment.
Another way to ensure approval for commercial lending for real estate is by putting down a significant amount as the down payment for your loan. It will give the impression that you can pay back the loan as agreed. Moreover, it can also help you lower your monthly repayments and the interest rate for your real estate loan.
Getting approved for a commercial real estate loan is a challenging task. It would help if you established that you are a safe, credible borrower who can keep your end of the deal. If you wish to increase your chances of getting approval, consider paying off your debts to improve your current credit score. Look for a co-signer or an investor to help you with your loan process.Â
Lastly, you can save and put down a significant amount as your down payment if you have the means to do so. Contact Real Estate Funding Solutions for more tips on getting approval for your next commercial real estate loan.
Real Estate Funding Solutions Can Help You Get Approval.
Our Real Estate Funding Solutions experts have years of experience helping investors get approval for their commercial real estate loans. Our professionals can help guide you throughout the process and give you more tips for getting approval. We can also help you find ideal loan terms for your next investment property purchase. Call us at 855-913-8637 to find out more about the same.