Commercial Financing - Tips and Advice

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Author: Aazdak Alisimo

Article source: http://www.articledeshboard.com/. Used with author's permission.

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.

Obtaining commercial financing requires you to learn an entirely new world of finance. Information learned in the world of personal finance is not going to cut it. Here are some tips and advice to help you out.

Get your documents together. Commercial loans are much more documented oriented than personal loans. Make sure you know what you need before applying and have it in triplicates. Don't assume you can pick something up at the last moment.

The underwriter is going to want to view your financial situation. Prepare personal financial statements for the year that are up to date. Do the same for your business. The statements should be up to date within 45 days of submission.

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.

Unlike residential lending, there is a lot of wiggle room in commercial lending. This means that a rejection with one lender does not mean another will come to the same conclusion. As a result, shop your loan to many lenders.

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.

Don't assume your personal resources will be around. You are going to need to have your CPA and lawyer around to answer questions and make documentary statements. Make sure they are in town and not on vacation. Murphy's law!

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.

Find commercial mortgage brokers at CommercialLoanStop.com.