When you are going in for commercial financing, you need to have your head above water. If you think you are just going to waltz in to a bank or credit union, wink an eye, and walk out with a hefty chunk of change for your commercial real estate deal, you are dreaming. There are several things you need to know about commercial finance for real estate; here are a few.
Commercial Finance with Good Credit: You have to have good credit in order to get commercial finance. There is not a lot of leeway in this so if your credit history is questionable, you may want to get a bigger down payment, a partner who does have good credit to sign on the loan with you, or both!
Loan Amount Can Not Exceed Liquidity: As important as the last is this next; in order to land commercial financing you need to have liquidity which exceeds your loan amount. If you don’t have cash or other resources on hand to operate your commercial line of credit, where does the bank think you will be in a few short months’ time? Back to them, that’s right; hand outstretched; desperate for more cash. You have to make sure that you are able to finance your commercial enterprise before you try to finance your commercial real estate venture.
Detailed Records: In order to be taken seriously by any credit provider, you need to be worthy of being taken seriously. If you want a ten million dollar construction loan on a “can’t miss” opportunity, and you have no background in construction or financing, you can bet that you are not going to be taken all that seriously. Make sure you have all your receipts and statements in order and make sure you can get the financing agent whatever they need.
Property Value: If you are trying to borrow top dollar over property whose value is far less than your loan amount, you probably will get pushback . Property is very expensive. If the bank gets an estimate and it is 1/10 of what you are asking for to finance the deal, there is something wrong with this equation. Make sure you have all the right information in place and make sure you have had an independent appraisal done on the property. Have the property value assessed even before you go to the bank; this way you won’t waste anyone’s time.
Source:
https://www.wellsfargo.com/com/financing/real-estate