It’s easy to get a loan for a commercial property. All you need is a good credit score and some collateral. Right? Wrong! You could have the best credit in the world, but without any property as security, lenders will turn you down flat because they can’t take it if you default on your debt.
And this means that commercial real estate loans are tough to come by for some. Make sure that you are approved with these tips.
1. Get Your Credit in Shape
If you are hoping to borrow $5000 or more for a commercial property purchase, get your credit in shape with these steps:
- Pay off all high-interest debt
- Build up an emergency fund and keep it separate from your main bank account
- Keep any outstanding balances on all of your accounts below 50% of their total amount.
2. Find a Qualified Lender
To fund commercial property purchases in your area, you may need to work with several lenders before finding one that will approve you for financing at the best interest rate possible.
3. Find Conventional Loans or Private Money
While many lenders won’t touch these loans, some banks offer conventional, hard money, and bridge loans for commercial properties. If your credit is strong, you may be eligible for a loan with conventional rates, but your lender will want to see that you have the cash on hand.
4. Consider Hard Money Loans
Another type of commercial financing available is hard money. Hard money loans are attractive to borrowers because they feature lower interest rates and fewer restrictions than conventional ones.
However, these loans also typically require 50%+ down payments along with strict repayment terms (some commercial lenders even require that you repay the loan in as little as one year).
5. Find a Trustworthy Bank
If you are approved for a hard money loan, you may be able to work with the same bank or credit union that is lending you money on your business. If not, find another lender with high customer satisfaction ratings and a proven track record of working with commercial clients.