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Helpful Advice On Commercial Loans
You might think pursuing commercial financing is just like applying for a loan for your home. If so, you are incorrect. We are talking the ultimate case of apples and oranges here.
You might think pursuing commercial financing is just like applying for a loan for your home. If so, you are incorrect. We are talking the ultimate case of apples and oranges here.
If you are going to apply for a commercial loan, particularly for real estate, you need all the help and information you can get. Following are a few nuggets of advice that can help you get the financing you need.
Don’t believe the hype when it comes to commercial lenders. Simply put, they want your business and will do practically anything for it. If they promise a 30 day period to work your loan, realize it is going to take much longer. Apply early!
Toxic properties are a nightmare for lenders. Specifically, properties with toxic contamination. If a lender provides financing for the purchase of such a property, it becomes liable for the clean up costs with you. Toxic reports are mandatory.
If you are refinancing a property loan, make sure you have the critical documents the lender is going to want to see - the payoff amount, the survey and title. Ask to see if the lender will require the original appraisal as well.
When applying for a new loan, the sales contract for the property must be complete. You cannot get “pre-approved” when it comes to most lenders. This means you need to be as prepared as possible before submitting your docs.
If you are buying rental properties, get copies of the lease agreements and include them with the submitted documents. Also, make sure the lease statements match the total rent being claimed for the properties. If not, state why this is the case.
As strange as it sounds, you need to review and run through your personal credit report. Some lenders put a lot of emphasis on this and others do not. Still, clean it up and submit any explanation of problems that appear.
If your are borrowing money as a corporation or limited liability company, make sure you have a certification of active status from the Secretary of State. It can take months to get this from some states, so plan ahead.
Commercial bridge loans typically have a term of six months to a year. The interest rate can be outrageous, but is highly negotiable. Don’t hold back. Play just as rough as the lender on the term. Try to find two lenders and pit them against each other.
Appraisals are an area of confusion and unwarranted expense in commercial lending. The rule is simple. The lender must order the appraisal. Don’t let a broker or someone else talk you into paying for one not ordered by the bank. It will be worthless.
Be very conservative on the value of any commercial property you are buying. The negotiated price is not the value as far as the lender is concerned. Make sure you don’t buy a property that you can’t get sufficient financing for.