When pursuing a commercial real estate loan, you first need to understand the type of property that qualifies as such (with the alternative being residential). Most lenders consider a commercial building one that is 51% occupied by you, the owner; as in, your business must inhabit this portion of the building. Once this requirement is satisfied, then you will still need to certify a few others. Depending on the specific type of commercial real estate loan you need.
When lenders are deciding to release funds or not, they will take your finances into consideration, as well as the characteristics of the relevant commercial property, and of course the projected or present financial status of the business, itself. Let’s take a deeper dive.
How Are Your Personal Finances?
As in most things that involve lending, your creditworthiness is a standard measure of expected performance with future loans. If your credit history is rife with past loan defaults, adverse court judgments, tax liens, or property/business foreclosures, this could significantly hamper your chances of securing a loan with a favorable interest rate. Personal FICO scores do, indeed, affect your commercial loan opportunities.
A Preexisting Business: Are the Finances Above Board?
If you already have your business set up and are seeking a commercial real estate loan for an additional purchase, renovation, or other, then lenders and banks will gauge your cash flow to see if your business can afford the commercial loan. The primary metric of interest is the debt service ratio; which tells them how capable you are of paying back both principal and interest.
Getting Things In Order Before You Apply
To facilitate the procurement of a commercial real estate loan, you should try and pay off debts before you apply. This will raise your FICO score and present a great face to the prospective lending companies insofar as personal finances are concerned. If you have collateral on hand, this is also a boon; if not, then having a cosigner with a stellar credit history is an excellent substitute.
There are several options available to help you secure a commercial real estate loan with favorable terms; contact the financial experts at Jasema Capital for more information.