Financing is an important part when you decide to buy commercial real estate, both for the purpose leased back or used for your own business. This is very important in the process of buying this unless you can afford to buy the entire building because most people can not afford to pay for a commercial real estate with their own money even though some of them have a very good source of funds.
Lenders want to make sure they get the right buyers because commercial real estate loans is a competitive business. So, when you want to pay attention to your lender, then you should be ready with the necessary documents, and you need to show the lender that you are a serious buyer and are interested in commercial real estate. Just like home loans, the commercial real estate purchase process you also need to find some type of proper loan. Below are a few things you should know when you are looking for a lender for commercial real estate:
1. Fair and reasonable down payment
In many cases, it is very rare that someone can receive loans for commercial real estate with no down payment, so you have to plan in advance and at least you already have the money for a down payment when you start the loan process. Usually down payment take of 10% up to 30% of the total value of the building.
2. Having a good credit
Fee on commercial real estate are usually higher than the average home loan. Lenders may be hesitant to accept a loan if you are a person with poor credit, even if you have a lot of experience in your business. To get a commercial real estate loans you need solid credit history that used as a parameter that you are free from the possibility of bankruptcy and late payment. If you have bad credit, it is better if you make it right before you apply for these loans, to facilitate your move, you can get your FICO score at one of four these companies --TransUnion, Equifax, Experian or Innovis--. To get this loan, at least you have a FICO score above 700.
3. Have some important experience in your new business
Provide loans for commercial real estate is a risky thing for lenders, especially if you do not have the experience to the field you would do. For example, you apply for a loan is to run a salon business while you do not have previous experience in this field. This could make lenders hesitant to lend to you. So, you will be hard to get a loan if you have no experience in the field of new businesses are going to do because lender afraid that you will potentially fail at the business you wish to run.
4. Having a good business plan
One thing that you can do to make lenders impress is to have a good business plan. You also have to show them that you know how to make money and make your business succeed, no matter how much experience you in this endeavor. This business plan can be a parameter for the lender to see if you know about the business you wish to run and if you are prepared for the possibility that anything could happen. In addition, with this plan, lender will know the kind of your business, how you plan to run this business, and where the area you will use.
5. Ability to pay
You need to show the lender that your business will have a positive cash flow if you apply for a loan to run your business instead of buying the building. If the business is a main business and you failures and ended badly, then you may will not have money to live and pay. So, you will not get these loans if lenders think that you might not be able to pay them, as you planned.
6. History of the company
If you are planning to buy an established business, the question is how much the business is going to change? If everything is the same and just different owner, then you may get a good chance at your new business, especially if the workers remain and have had more experience, this will be a positive for you and will increase your chances to get a commercial real estate loan. But if you are planning to start a business from scratch, it will be difficult for you to get these loans.
7. Appropriate training
You can negotiate a loan by writing a training period in your contract when you are planning to buy a business unfamiliar and you might not experience in this field. You can ask old business owner to provide you with the training to teach you about what you need to know about the company. Perhaps this event could take several months or a year, but the best thing is this training period will ensure you to be able to get a loan.
8. Seller loyalty
When you have decided what business you wish to run, lenders want to know if it's the right choice for you and them. If the seller is willing to take back the loan if you fail to execute the business, then it means that they are offering something of quality and worth for sale
9. Total income you have
Do you have any other income apart from the new business would you run with this loan?? If so, then this could be more attractive to lenders. People with extra income means they can pay the loan faster and when your new business was bad you still able to pay the loan.
To complete the process of commercial real estate loans take about 30 to 60 days, it all depends on how quickly you can prepare the necessary documents and submit to them. Faster you are prepared with these documents, faster you can get a loan too.
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