How to Get a Commercial Real Estate Loan

Running a business is extremely hard, and even worse, starting one is typically more challenging than that! There is a multitude of things to consider and keep in the forefront of your mind, and that’s not even considering how much money you will likely need to start your business.



However, as with many things business-related, there are programs in place that will allow for business owners to gain some additional money when it comes to a desperate and sudden need for finances.


Today, we will be talking about commercial real estate loans.


What Is a Commercial Real Estate Loan?

When it comes to different types of business loans, a common one that you might encounter at some point in your life is the commercial real estate loan. This particular loan is a specific type of mortgage that will be secured by taking out a lien on a property. Keep in mind that this lien can only be taken out on a commercial property and that it’s not at all able to be taken out on a residential property.


Commercial real estate is a term that refers to any sort of property that you own that is income-producing (such as apartments, retail stores, hotels, and offices).


When it comes to these loans, they are specifically designed to try and help business owners who need money to purchase commercial property, refinance real estate debt on property they already own, or help with the funds to renovate a commercial income-producing property.


How to Get a Commercial Real Estate Loan

Luckily, when it comes to applying for and being approved for a commercial real estate loan, doing so is not much different than any other type of loan out there. So long as you do your due diligence and ensure that you have all your documents in proper working order, you shouldn’t have too hard a time when it comes to applying for the loan.


The approval, of course, will not be guaranteed, but there are certain things you can keep in mind to determine how much of a chance you have to receive the loan.


No matter which type of commercial real estate loan you’re going for (SBA 7(a), SBA CDC 504, etc.), there are key things to keep in mind for this application and approval process.


Be Familiar With the Ins-And-Outs of Your (Business) Credit Score

As with all loans, the health of your credit score will play a very large role in determining if you’ll get the loan you want or not. The higher your credit score (850 is the maximum), the higher the chance that you’ll be granted the loan you’d like.


However, that’s what is applicable when it comes to your personal credit score. Your business credit score is a different beast that typically works on a 100-point scale.


The reason a higher score is more important is that a credit score is a financial summary that details how responsible you are when it comes to repaying debts, on time, and in full. If you want to get great rates, a large loan amount, and not have to pay a large down payment, then the higher your score, the better.


Prove Your Eligibility for the Loan

When it comes to loans, lenders want to know that you have a desperate and unfixable need for the money. As such, you’ll have to create a business portfolio that will include information regarding how long you’ve been in business, your debt-to-income ratio, what your annual revenue is (to see how viable you’ll find paying off the loan to be), how much your collateral assets are worth, and other options.


If you want your application to have the highest chance of success, make sure you have access to all this information if and when the lender asks you to provide it.


Compare and Contrast the Lenders

Just because you need the money doesn’t mean that you have to go with the first lender that you find! Indeed, when it comes to looking for lenders, ensure that you’re working with a reputable company. You can do this by checking their reviews and reaching out to past customers. When you do this, you’ll be hoping to get a comprehensive idea of what getting a loan from them is like. Once you do your research and find a lender you like, it’s time to apply.


Application

Ensure that you follow your lender’s guidelines when you apply to have your best shot. Then, it’s time to wait to see if you’ll be approved.