Commercial Lending Tips

You’ve decided to buy rather than lease your business location. You’ve signed a Purchase and Sale Agreement.  Now what? 

Preparing an application for commercial real estate financing can be daunting if you’re a first-timer. The process is nothing like qualifying for a residential mortgage.  Here are a few tips to make it go smoothly. 

1. Know Your Stuff

Since your business will be responsible for paying the mortgage, the strength of the business is key to success.  But the business cannot speak for itself, so you have to speak for it.  You can do this by producing accurate financial statements.  If growth is going to help repay the loan, projections are also necessary.  Use a professional, if needed.  Have a firm grip on understanding, interpreting, discussing and defending your business’ financial statements.  You should be your business’ strongest supporter!  

2. Assemble The Best Loan Application Possible
Commercial loan applications include a “Needs List” of supporting documentation that you’ll have to provide.  On the “Needs List’  will be business tax returns, personal tax returns, a personal financial statement (PFS), year to date financials and other information.  This documentation is a lender’s primary tool for underwriting and approving a loan.  Preparing an accurate, complete and readable PFS indicates to a lender that you are engaged in the process and know where you stand financially.  Providing all of the requested items – in their complete format – in a timely manner is a reflection of your business management ability.  If having difficulty providing something, don’t ignore it, talk to your lender about it.  There may be another solution.

3. Seek Help
There are plenty of free resources out there to give you guidance when applying for a commercial real estate loan.  Coastal Community Capital, SCORE, and the MA SBDC, all of which are supported by the U.S. Small Business Administration, are just a few. The SBA’s mission is to “help entrepreneurs start, build and grow businesses in partnership with public and private organizations.”  Review your Loan Package with one of these resources prior to submitting it to a lender.  Revise if necessary.  Discuss your business’ financial statements too.  The practice will help you fine tune your presentation to a lender, even if the lender is a resource, such as Coastal.

4. Go For It!
Timing has never been better.  Interest rates remain low and real estate values are still reasonable.  If you are still unsure, a resource provider can help you analyze your options.

About the blogger: Jeannine Marshall is President of Coastal Community Capital. Email her at jmarshall@coastalcommunitycapital.org.