Secrets to Finding a Commercial Lender

Purchasing commercial real estate for your business is a HUGE decision — one that should not be taken lightly. Before you become a commercial property owner, Statewide Roofing Specialist you will need to find a lender to help finance your purchase or construction.

Even if you already have a healthy relationship with a commercial bank, you will want to evaluate all of your options for commercial real estate financing. Choosing the right lender for your project will make a world of difference. You want a lender who understands your needs as a business owner, not just a borrower. You want a “partner” in the financing process.

Before you begin looking for a commercial mortgage lender, there are things you can do to make sure you’re teamed up with the best lender for you. In this report, you’ll learn the 15 secrets to choosing a commercial lender, including what to look for and what questions to ask. Once you’ve read this information, you’ll be equipped to make the best commercial financing decision for you and your business.

1) You Have Options

You deserve to work with a lender that understands your needs. In other words, you don’t have to choose the first lender you talk to, nor do you have to settle for a lender with a small branch office around the corner. Purchasing your commercial property is a HUGE step in the life of your business, and the lender you choose will play a large part in it.

It’s important that you know exactly what you want in a property and in a lender. You should feel comfortable with your commercial lender — you should see him as a trusted partner in the investment you’re making.

2) Choose the Best Loan for Your Business

A good commercial lender will share several loan options with you. You can help expedite the process by educating yourself on the loan basics ahead of time so that you’re well prepared to make the decision on what kind of loan will be best for you. Proper due diligence on your part will make the process much easier.

Commercial real estate financing comes in a variety of “flavors” — each with its own requirements and nuances. The following are two types of loan programs that you’ll be able to choose from:

Conventional Commercial Loan

Ordinary, or conventional, commercial real estate loans have the option of either fixed or variable interest rates (usually only up to 10 or 15 years) and typically require at least a 20% equity injection from the borrower (you). Many business owners find it difficult to come up with the down payment that a conventional loan requires. Keep in mind that additional soft costs and closing costs will likely come out-of-pocket as well. Even if you’re able to afford the 20% down payment AND have enough cash left over to cover closing costs, this is probably not the best use of your capital. There are better ways for you to reinvest this money back into your business instead of tying it up in a non-income producing asset like real estate.

SBA 504 Loan Program

Considered by many lenders to be the “Best Kept Secret in the Loan Industry,” 504 loans offer below market interest rates (up to 30 years), and require as little as 10% down. Another perk of this loan program is that soft costs and closing costs can be rolled in to the total project cost and financed (meaning they won’t have to come out-of-pocket).

The lower down payment and longer-term fixed interest rates make owning property much easier for many business owners to build or acquire their commercial property.

These are just two of the many financing options you have, but hopefully you can see how they differ. There are advantages and disadvantages to each type of financing, and a good lender will be able to explain the best options for your particular business.

NOTE: Be wary of banks — they have the tendency to promote certain products that generate higher “yields” for them.

The loan a bank offers you may be a large revenue producer for them but a poor decision for you. You don’t want to be the square peg being forced into a round hole. More on the “banking mentality” later in this report.

3) Get Pre-Approved As Soon As Possible

A good commercial lender will be able to review some basic documentation (personal financial statement, tax returns, business schedule of liabilities, etc.) and give you a firm idea of exactly how much property you can afford. Though this is a vital part of your purchasing/financing process, more info please it should take no longer than two days. If a commercial lender can’t provide you with a firm Pre-Approval letter within this timeframe, you should keep looking.

Once your documentation has been reviewed, you will be issued a letter or similar document stating you are approved for a certain amount within a specific timeframe. You may be charged a small fee to cover the cost of your credit reports and your application, but don’t let that deter you from this very important step. This fee is often refunded at closing.

The advantages of being Pre-Approved are two-fold:

1) You are more attractive to sellers who often want solid evidence that you can actually afford their property.
2) You’ll ultimately save time because the lender will have already completed the necessary qualifying and underwriting requirements.

A Fast and Timely Pre-Approval Is Absolutely Necessary

Your commercial lender ought to understand that, for small business owners especially, time is a valuable and often a scarce commodity. Some lenders have shortened their Pre-Approval application requirements to as few as seven basic documents. Additional documentation will be required to complete the underwriting process, but a good lender will be able to Pre-Approve you with this information.

Time is a precious commodity in the loan process. It can often mean the difference in getting the property of your dreams or missing out on the opportunity because of unnecessary delays in the approval process from your lender.

You need access to every possible advantage during the loan qualification process. Find a lender who has streamlined the Pre-Approval process and cares enough to help reduce the time it takes to close on your loan.

4) Work with a Specialist Rather than a Generalist

One of the first places most people look for a commercial loan is their local bank. Often times this can be a big mistake.

Banks provide a wide variety of loan options for their customers. Sometimes this philosophy can backfire on the customer (and the banker). The mere convenience of a “one-stop-shop” should not be the deciding factor

Banks offer generic solutions for their business clients. That’s not what a small business or entrepreneur needs when seeking help with a commercial loan. Bankers are considered “generalists” and not “specialists.” Banks often provide a “one-size-fits-all” solution for every customer.

The danger of having too many loan programs under one roof is that borrowers get mediocre service (at best). It becomes a difficult task, even for the most seasoned bank representative to provide professional guidance for their customers when he has to try to understand all the intricacies of a plethora of financial products. Purchasing commercial property is a huge decision — you deserve the level of care and service only an expert can provide.


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