Securing a commercial mortgage is never an easy process. But you can greatly increase your odds of an approval by learning what commercial lenders are looking for on loan applications.
The more you investigate the process of securing a commercial mortgage the more that you will learn that each lender has a few unique items that they are looking for on a loan application. But you will also find that there are some important pieces of information that all commercial lenders will be interested in. Learning what these key qualification criteria are and how to best present them can have a huge impact on how successful you are when seeking a loan.
Commercial lenders need to make a decision about you and your business without really having any personal experience working with you. So they are going to rely heavily on your credit history to determine how seriously you focus on repaying your debt. This resource lets them used the experiences of those who have worked with you in the past and learn from them. All lenders are going to take a hard look at your credit history and place a great deal of importance on it. So be sure that your credit history tells a story of strong payment history and diligent work to remain current on your debt.
Your ability to repay the loan that you are requesting is also paramount to commercial lenders. They want to know that you have the cash flow to make the payments now and that your business will remain strong and continue to have the ability to make payments. To demonstrate that you meet this criteria, you need to show that you have good cash flow currently and also that your projections show continued or even increased cash flow for the future.
Another factor that is important when requesting a loan is the value of the collateral that you are offering. In most cases the collateral will be the property that you are purchasing but in other cases it could be your inventory, equipment or another property that you own. Be sure that the current market value of your collateral, whatever it may be, has a value in excess of the loan that you are requesting. In most cases you would need the collateral to hold about 120% of the value of the loan that you are requesting.
Numbers Are Not Everything
All lenders are also going to want to know more about the person whom they are potentially going to be doing business with. They want to know that you have a strong sense of responsibility and that your character is impeccable. They need to know more than just your net worth and who you have borrowed from in the past. Take the time to tell your story, how you decided to start a business and how you have managed to grow it to the point where you are currently. Also explain your vision for the future and how you plan to reach your goals.
Demonstrate Your Professionalism
You know that along with the loan application, you will need to submit a small mountain of documentation. Having that packet prepared and in a professional format shows potential lenders your level of professionalism, how well prepared you are and that you invested the time to learn about the process and the required documentation. Understanding what a lender is looking for and why will help you to be more prepared and more successful when applying for a loan.
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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