Are you looking for a commercial real estate loan but don’t know where to begin? In this post, we will break down what lenders consider when reviewing your application, and we'll provide tips on how to prepare for the application process.

What do Lenders Consider?

Before applying for a commercial real estate loan, it's important to understand the factors that lenders consider when reviewing your application. These factors include your business finances and plan, as well as personal finances and credit. Property characteristics, such as property type, location, occupancy (leases), and condition, are taken into account. We recommend ensuring these areas are in top shape to increase your chances of getting approved.

So, how should you prepare for the application process?

1. Start Early

Timing is key when it comes to applying for a commercial real estate loan. Last-minute rushes can make the process difficult and may put you at risk of missing out on opportunities depending on the lender you are working with. Appraisals, environmental reports, surveys, etc. can take up to 60 days to complete. Lender underwriting typically takes 30 days to complete once they have a complete package. Therefore, it's advisable to start the process as early as possible. It’s also recommended to work with a lender who is flexible and responsive.

2. Have a Well-Prepared Business Plan

It is essential to have a well-prepared business plan outlining what you plan to do with the property. The plan should include cash flow projections, rent roll, improvement budgets, and sources and uses. Having these items well-prepared shows the lenders that you have a solid understanding of your business and how you plan to generate income.

3. Get Your Financials in Order

Lenders will want to look at your business financial statements and tax returns, as well as personal financial statements and tax returns of property owners. Make sure you include K-1s with tax returns, as well as bank statements and brokerage statements to verify liquid assets. It's essential to ensure these documents are accurate, well-organized, and easy to understand to increase your chances of getting approved.

Getting a commercial real estate loan can seem like a daunting process at first, but with the right preparation and the right partners on your side, you can greatly increase your chances of getting approved. Be sure to organize your financials, have a well-prepared business plan, and, most importantly, plan ahead. Understanding what lenders consider can give you an edge when submitting your application and help you secure the funding you need to take your business to the next level.