Investing in commercial real estate or expanding your growing company with a loan that lets you purchase new operating space can be a powerful financial move. But commercial lending is a challenging process with a higher barrier to entry than other mortgage or loan types.
Even when you have the right qualifications and finances, getting approval for a commercial real estate loan often depends largely on how you navigate the process in. In order to increase your chances of success, having the right tools, resources, and mindset is essential.
Requirements for Getting a Commercial Real Estate Loan
As with any loan process, there are some things you must have to secure a loan – a good credit score, the necessary down payment or collateral, financial history. Beyond these pieces, the other key elements that will help your real estate loan application succeed with as few obstacles as possible include:
- Knowing that Timing is Everything – Too often, delays are a leading source of a failed loan and you want to avoid anything that could slow the process down. This means keeping loan documentation organized so that your lender can move through quickly. You also want to keep information organized on your side to provide a fast response whenever your lender asks for more information. Never delay in giving those responses as it can severely delay or sidetrack the loan.
- Hiring the Right People – Lawyers, accountants, and loan officers, who can not only provide you valuable professional advice and take care of all the tasks necessary to underwrite your loan, but who also understand the importance of timeliness, will be a leading resource for you during the process.
- Planning Your Own Timing – Although working through the process as quickly as you can on your end is a must, borrowers should recognize that underwriting a loan will still take time and a last minute approach will leave you without a loan by your closing date. The competition in today’s market means that properties are going very quickly and you will want to leave a reasonable time period to give your bank and everyone involved enough time to complete the process.
- Having a Business Plan – When your business is purchasing a new property, you should be able to show your lender a detailed plan for your expansion and operations to indicate how you will cover the loan payments.
- Keeping Your Details in Order – In the interest of time, organization, and being able to get the right loan type and amount for your needs, keep up with your accounting, cash flow, and other information long before you apply for a loan. Use annual accounting audits at minimum and have everything you need to make it go as quickly as possible once you apply for a commercial real estate loan.
- Manage Your Expectations – Every commercial real estate loan is highly individual. The terms depend on the lender, the borrower, the situation, and other details. Researching current commercial real estate loans can provide guidance, but understand that your situation can vary. It is beneficial to reflect on what you can expect at minimum and plan from there.
Another key factor that can help you navigate the commercial loan process is working with a loan officer that you can trust. Mike Landrum at Landrum Loans is a loan officer who works with real estate investors and businesses to help secure commercial real estate loans. Our experience with commercial lending, in depth knowledge of commercial loan types, and personalized approach to helping you meet your loan and financial goals offer the resources you need in commercial lending. Fill out the application form to get started today.