Obtaining a commercial business loan is a bit harder than other types of real estate, because there is more risk to the lender involved. If your business doesn’t do well, you aren’t the only one who potentially stands to lose a lot. But it’s certainly not impossible – and it’s even not that hard when you have your finances straight, a clear plan and vision, and a clean business and personal credit history. You may be wondering at what Lender are looking at when you apply for a commercial business loan. While this list is not all-inclusive, as there are many types of lenders and businesses out there, it is a good initial guide to get you thinking about what you may want to pay attention to, or in some cases, get fixed. Also remember that one lender says “no” to, another may say “yes” to – it is very individual and depends on characteristics about the Lending company itself. However, these three aspects are things that are dependent upon you, the borrower.
Three Aspects Lenders Consider When You Apply For A Commercial Business Loan
- Business Finances
- Personal Finances
- Property Characteristics
Any business you have had in the past, including the current one, if you are just seeking to upgrade the structure your business resides in, will be scrutinized through a credit check process. This means things like interest rates, payback period, any late or missed payments – all will apply. It’s important to remember that one or two business mishaps from the past don’t necessarily destroy your chances of securing a loan. Lenders are looking at the entire picture, not just one aspect. There’s always risk involved, and they understand that.
Your personal finances come into play here, so it’s important to get your person credit squared away. Do you have any repossessions or bankruptcy history on your credit report? If so, it’s probably best to hire an attorney that specializes in credit clean up that can help you sort these matters out. It won’t be cheap, but definitely worth it, if your dream is to own a commercial property. On the other hand, if you just have been late on a payment or two in the past, you might be pleasantly surprised to find out it didn’t hurt your score terribly. Be sure to keep an eye on your credit through all reporting agencies and check it often, even if you haven’t had a lot of transactions. The reason to do this is so you can catch fraud and mistakes. It’s estimated about one third of Americans have a mistake on their credit report, and many don’t even know. These mistakes can greatly affect your score, and they can be correctly, but you need to be aware of your score.
The final and arguably most import characteristic that lenders consider is the actual commercial property. Where is it? Is it in good shape, or does it need a major overhaul? The fact that it needs fixed up won’t instantly disqualify you, but if it’s in a high-crime part of town that is prone to natural disasters, is going to be a service that could be an environmental hazard (such as a gas station) – a lender may give pause. It’s smart to only tackle a business that has one risk factor or none (location, type of business, part of the country.) Unless you’re able to put a significant amount of money as down payment, most lenders shy away from high-stakes loans. Instead, consider something smaller but in a better location with less crime, etc. There are always ways to achieve your dream – get creative, and do your homework.
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