Getting your first commercial real estate loan can be stressful, but there are a few ways to make sure you have your best odds. A lot of the determination comes down to your financials, but not all of it. The first thing to remember is that the loan you’re applying for and the purpose of the purchase has a lot of bearing on the determination. The financial requirements for a fix and flip loan with 12-month terms will be a lot different from those of a 504 loan guaranteed by the SBA, so you’ll need to prepare your disclosures and other materials to highlight the important aspects of your business to the lender.
You’ll also do a lot better if you give yourself more than one shot at a time. Applying at too many places can over-complicate your paperwork, but there is often a happy medium you can achieve without too much stress. Apply to a few places at a time, to speed up the determination process by giving yourself multiple simultaneous chances. To keep things manageable, group the rounds of applications according to the loan type and cost, so you start with your best deals. If you’re using an SBA loan to finance your purchase, look for preferred lenders. If you use a traditional lender, you can only make one application at a time because the SBA needs to review each one, in addition to the lender. Preferred lenders can make independent determinations about commercial real estate loan packages guaranteed by the SBA, though.
Make sure you do everything you can to improve both your personal and business credit scores prior to applying, too. While your business credit score is the more important of the two, the personal credit situation of an entrepreneur is considered highly pertinent to the risks associated with the loan. By doing everything you can to establish a good business credit rating while maintaining your personal debts and lowering their overall balance, you do a lot to increase your chances of getting approved.
Lastly, make sure you have a detailed business plan with well-reasoned financial projections. Loan officers are trained to look deeply into the reasoning behind projections because their likelihood of coming true is the relative risk level of the loan. If your commercial real estate loan application has projections that seem too good to be true, they’ll be treated that way. At the same time, if they are gloomy, they won’t look good. Make your best, most reasoned pitch that shows how the loan will help you make more money, and use realistic explanations to show how you know what your likely ROI will be.