We’ve all heard, the first impression is the last impression; then why is it that we head to a meeting with the financial institution—be it the land or a private lender—without doing our homework? The fate of the purchaser does lie on external factors, but you can boost your chances if you put yourself in the lender’s shoes. Here are five steps to ensure you get approval for commercial real estate financing every time:
1. Show profitability
Your company’s finances must be organized and must be a clear reflection of growth and profitability. Any business with significant losses doesn’t have great chances of acquiring a loan.
2. Study your space requirements
Access your space needs carefully to show clear evidence of solid planning. Whether you want to lease or buy, you’ll want to figure your budget, suggest your desired location, square footage needs, and how you intend to accommodate projected growth. Additionally, consider any extra costs linked with the property, such as production downtime during the transition, due diligence costs, recurring operational expenses, renovations, and leasehold improvements.
3. Property in Mind
Lenders tend to decide the amount to lend based on the type of building, including characteristics, such as its resale potential, age, and condition. If the borrower doesn’t quote a specific property, it makes it troublesome for the lender to quote a financing amount, thus increasing the chances of rejection and also giving off a poor impression.
4. Prepare the Documents
Simultaneously, prepare the documents that are required by the lender. These include the business plan, property details, and an updated financial statement. It’s also a good idea to give evidence of organized and experienced management or production team.
5. Investigate Loan Terms and Rates
It’s essential to have a clear understanding of the financing authority’s terms and rates. One key variable is the loan-to-value ratio, which is a clear indication of the portion of industrial property’s value the lender will finance. This amount generally accounts for 75 to 100 percent coverage of the total value of the commercial real estate, depending on factors, such as resale potential and building condition. A shortfall is derived from the entrepreneur’s fund or the company’s working capital. Secondly, consider the overall flexibility of the lender in terms of repayment and discuss the consequences of delayed payments. Lastly, you may also wish to discuss the loan term to address the cost of renovations at your own pace.
Commercial Private Equity is a private hard money lender that successfully runs multiple commercial loan programs in Atlanta, GA. We offer commercial hard money, bridge loans, construction loans, raw land loans, workouts loans, and everything in between that you need for your commercial real estate. Schedule a consultation today and get your dream project started!