Applying for a commercial loan is a completely different ballgame than applying for a residential loan. Commercial lenders have a different set of priorities and at the end of the day, it can be significantly harder to obtain a commercial loan. Don’t let all this discourage you though, it just means you need to come into the process prepared.
Tips for Applying for a Commercial Real Estate Loan
Don’t Rush Into Things
When you’re applying for a commercial real estate loan patience is key. This property purchase is a huge deal; thousands of dollars and years of your future are on the line here. Make sure you think long and hard about every decision. Even the approval process for the loan can take quite a bit of time. By not rushing the process you may uncover information that prevents you from regretting your purchase later.
Research Before You Sign
The language of commercial real estate lending can be complicated, so if you want to know what’s going on, you’ll have to put in a little bit of time doing research. Familiarize yourself with some universal commercial loan concepts so you can communicate about the details of the terms of your contract intelligently and avoid any potential misunderstandings.
You can’t expect to become an expert in the field overnight, but even a little bit of knowledge can go a long way. As a bonus, if your lenders see you putting in some effort they may feel more comfortable approving you for a loan. Commercial real estate lenders are pretty risk-averse since the loans aren’t backed by the government so you need every point you can get.
Know How Much You Need
One of the first things to do before applying for a commercial property loan is to take time and figure out how much you need to borrow. There are other things to consider with this as well, such as the down payment. A down payment on a commercial real estate loan on a new property is typically somewhere around 20 to 25%.
Choosing a lender will be determined by how much you need to borrow. Real Estate ABC.com explains that small business loans are often given by direct commercial lenders or small local banks. This type of loan may be for an amount less than $2,000,000. You will obtain larger loans, over $5,000,000, through regional banks. Mega-banks or Wall Street lenders loan the most substantial commercial property loans.
Once it’s time to apply for the loan formally, make sure you have all of the necessary documentation. Typically this will include:
- Personal financial records
- Income statements
- Business tax returns
- Insurance information
There is very little leeway on this, so make sure you know ahead of time whether you have all the documentation required. Sometimes small or new businesses won’t have the level of income documentation required by some lenders, so it’s best that you determine a lender’s requirements before you spend time applying.
At Ullian Realty we leverage over 50 years of combined market experience specifically in the Brevard County Melbourne/Palm Bay/Titusville commercial industrial real estate market to help you find the right loan for your commercial real estate venture. Please contact us today to find out more about real estate and commercial loans.