Getting a Commercial Loan: What Borrowers Need to know
So, you’re ready to buy a commercial space for your business. Great! But first you need to have your loan lined-up and secure. If you want to get a loan today, you need to:
- Borrow based on loan to cost, not loan to value. Lenders aren’t interested in how much the property will be worth in a better market; they will lend only on what you’re actually paying.
- Come up with 25 to 30 percent down. You need to have considerable equity in the deal if you hope to get a loan.
- Take control of the deal. In this market, don’t expect a lender to take you seriously unless you have a contract in hand.
- Know what the property will be worth in 90 days. If prices are falling, don’t expect to borrow on current values.
- Pay the fees. Borrowers need the cash to cover title, legal, and environmental due diligence costs; don’t expect to roll them into the loan.
- Generate income right now. You need leases in place that will at least cover your debt service.
- Offer more than just a good deal. “No one will lend on that.”
Here are some more basic’s to consider when looking to purchase a commercial property:
- In a down economy new construction and commercial properties are the first to take a hit. “Would you open a new business when people are tightening their belts?”
- Commercial properties generally take a lot longer to rent or sell as we all need somewhere to live, but not everyone needs a commercial property!
- Triple net leases can get expensive as you have to pay rent, taxes and all maintenance costs.
Want to know more? Call 503-317-6676 today for more info!
