Making moves with your business is exciting. Whether you’re expanding, moving spaces, or opening your doors for the first time, the process of renovating or locating commercial real estate is something to be thrilled over. For business owners, the first thing to do is to secure financing. Commercial properties and renovations require funds. While there are many different types of loans, having a good grasp of the ins and outs of commercial real estate (CRE) loans is essential before you can move forward.
Contact Alloy Development Co. to learn more about commercial real estate lending
There is much that goes into securing a commercial real estate loan. The proper steps need to be followed, and borrowers need to meet the list of eligibility requirements to be approved. The essential components that go into securing a commercial real estate loan include:
Establish Your Business – First, a business entity has to be established. This could include a Limited Liability Company or an S-Corporation.
Business Plan – For startups, will want to know how the loan will be applied should it be approved. They will want a business plan that outlines how you plan to use the money to grow your business. Established businesses will not need this.
Lien/Collateral – Financial institutions will require a lien on the collateral. If default on the mortgage were to occur, the lender could seize the property.
Creditworthiness – Lenders will evaluate income potential/history to determine if a borrower qualifies for the loan.
Financials – The lender will need several years of financial statements, tax returns, reports, outstanding loans, and more to evaluate a business’s financial history.
Loan to Value Ratio – The LTV is the calculation between the value of the collateral and the real estate loan amount.
Once all of the necessary steps have been completed from the lender obtaining your credit score and evaluating your financials, and more, you can begin working with your lender to secure financing for your commercial property.