As a business owner, you may be looking for a property to house your business. Finding the property, however, is only a portion of the battle. You will also need to obtain a commercial real estate loan in order to finance it. You may imagine that this is a complicated process, but if you understand the steps, it becomes a lot more manageable. Read on to discover the process of getting this type of loan.
How Will You Use the Loan?
Right at the start, you have to decide how you plan to use your commercial real estate loan. For example, if you are simply remodeling a property, you need to be able to visualize the end product. If you want to build a multifamily property, you need to make a plan regarding getting a contractor and seeking out land. And if you just want to purchase an office building for your business’s daily operations, you need to decide on a property and get it under contract. Pinpointing all of this will help you understand the size of the loan you need and where your funds will go.
What Kind of Real Estate Loan Do You Need?
There are multiple kinds of commercial loans. For example, the Small Business Administration backs SBA 504 and SBA 7(a) loans, so the interest rates are low. If you are interested in flipping properties, however, you may be interested in hard money loans. Compared with other loans, these have shorter terms and higher interest rates, but they are perfect for flipping and selling.
If you want a short repayment term, such as between 1 and 3 years, a construction loan may be right for you. But for buying property, a purchase loan is ideal. Also called mortgage loans, these have repayment terms of up to 20 years and provide big loan amounts.
What Will the Potential Lender Evaluate?
Once you have decided on the type of loan that fits your situation, you need to seek out a lender. Potential lenders will evaluate your creditworthiness by looking at your yearly revenue, business credit score and personal credit history. They will also investigate your property. This could include examining operating statements, purchase price and property type.
Every lender is different, but you will probably have to complete a lot of forms about the property, your business and yourself. You will then provide supporting documentation such as a business plan and personal and business tax returns. After that, it is just a matter of waiting for the lender to approve your loan! Best wishes on applying for and (hopefully) getting approved for your commercial real estate loan.