Applying for a commercial property loan is in itself a different ball game when compared to a loan for a residential property. Many a time, banks tend to decline requests for commercial properties or just ask one too many questions. If you’re buying a commercial property – be it a showroom or shop for the expansion of your business and wish to seek a loan for the same, your best option is private lenders. Here are five things to keep in mind before you get started on applying for your commercial property loan:
1. Technical Assessment
Suppose you wish to acquire a showroom or shop in a commercial building, the first thing you need to ensure are the technical aspects of the building such as the emergency exit, number of lifts, length and width of shafts, and firefighting arrangements. The relevant documents must be accumulated from the developer of the building as the lender is likely to check these out before deciding on lending the amount to you.
2. Statutory Approvals
It’s vital that the commercial building must be approved or, in other words, have clearance from all related government departments such as the fire department, forest department, etc. Ensure that the local authority or the municipality approves the structure of the building. Proof of these documents must also be taken to the lender for the party to sanction a loan to you.
The lenders tend to get stricter with time about lending for commercial property, considering the increase in housing scams and mortgage frauds in the United States. Any inflation in the property value by the builder to help the borrower gain a higher loan amount is likely to result in rejection. Remember, lenders know experts who carry out valuation better.
4. Minimum Area
Usually, lenders who lend for commercial properties construct their parameters based on the minimum area the lender will finance in a region or locality. Your retail real estate project may be rejected in case the space being acquired is tiny.
5. Differences in Monetary Value
It’s crucial for you as a borrower to know the difference in property value within the very building on a per square feet basis. Retail spaces tend to be pricier than office spaces despite being in the same building. For example, if the office space’s price is X per square feet, the price of retail space is 1.5X per square feet. The amount of loan depends on valuation by the lender.
Wish to discuss commercial loan financing? Reach out to Commercial Private Equity, where hard money is made easy. We operate as private money lenders for commercial real estate loans across Atlanta, GA. Additionally, we facilitate our clients with commercial construction loans as well.