How to Qualify for Commercial Loans Minus All the Stress?

The loan application process is tiresome, but there are things you can do to make the experience less stressful.

An experienced commercial mortgage broker can help you with the tedious task of obtaining a commercial loan. The process is really easier said than done so pay attention to what your broker suggests. Before anything else, borrowers need regular income, good credit, money for down payment, and real estate equity.

Property Value

Determine the exact market value of your property prior to applying for commercial loans. Commercial properties are usually appraised based on capitalization or comparison. Rate of capitalization refers to the rate of return on investment property based on income it will possibly generate. It is computed by dividing net operating income or NOI by the property’s existing value. NOI means yearly return on the real estate less operating costs. Comparison is comparing your property’s rate per square meter to similar properties of the same rate.

Property Strategy

Formulate a simple property strategy. Mortgage brokers can assist entrepreneurs who need commercial loans to draft this plan. Remember lending companies want to find out the owner’s purpose for mortgaging the property and how the loan can augment the borrower’s income. Prepare a basic chart of your corporate structure. This should be clear so the lender will understand your organization right away. Include a comprehensive Asset & Liability Statement. It helps the lender understand the borrower’s financial status which highlights the latter’s paying capacity. This statement must include the following:

  • Type of property
  • Name of owner
  • Estimated value of asset
  • Net income from the asset
  • Loan amount
  • Name of lending facility
  • Loan terms and conditions
  • Interest rate and surcharges
  • Expiry date of loan
Commercial Loans Minus All the Stress

Increase your Income and Fix Negative Credit

Any experienced broker will advise commercial loan borrowers to increase his or her income because it gives the lender a feeling of security. This can be done by following these tips:

  • Obtain a copy of your credit report from major credit-reporting firms. It is possible to get this free annual report from any of these companies. Or, you can print a form from the United States Federal Trade Commission (FTC) website or Annual Credit report site.
  • Check the report carefully for any errors. Report this to the creditor and consumer bureau right away. All omissions are rectified within 30 days at no cost to the individual based on the Fair and Accurate Credit Transactions Act.
  • Avoid incurring debts or settle current liabilities to avoid pulling your FICO score down.
  • Stay away from bankruptcy since this negative mark remains on your score for a minimum of 10 years.
  • Seek professional help particularly from debt counselors if you find it difficult to deal with financial arrears.

Loan Collateral

Get ready with collateral for the commercial loan. This security is put up as security for the mortgage request. Lenders have the prerogative to put into effect the mortgage acceleration clause to start the process of foreclosure. This will happen if you default on the loan. Aside from this, creditors normally require borrowers to assign leases or rentals to the lender for security.

Watch the Video