Thinking of purchasing a commercial property?       

                                                                           Learn the Ins and Out of getting a commercial real estate loan

Getting a commercial real estate as an investment or for the use of your business, most of the time you will have to get a commercial real estate loan unless you have enough capital to cover the entire purchase price" and most of the time, even if you have adequate capital to cover the purchase price, leveraging your purchase is something you will always want to consider because it may be better to free up the capital you have on hand to other deals". We have banks, brokers and services who are seeking to provide commercial real estate loans. It is critical to know what you will need to provide even before you approach a

lender for commercial real estate loan.

            What will be typically required for you to get a commercial real estate loan?
 

• Down Payment ( or equity in the deal
• Good credit
• Historical and pro forma operating statement
• Business Plan performance etc.
  
  Down Payment 
    
  Although it does happen, it’s extremely rare for an individual or company to secure a commercial real estate loan without, as they say, some of their “own skin in the game.” The lender obviously wants to know you’re serious about holding onto the property and the best way for them to guarantee that is based on how much of your own money is riding on you paying the bank back. Don’t be surprised if you’re expected to put upwards of 35% down to secure a competitive loan.

  
  Good Credit
  Commercial real estate loans cost more (i.e., the interest rate is typically higher) than their residential counterparts. This is all of course to do with risk. When lenders are dealing with higher dollar amounts, with people or companies who are taking loans to make money off their property (as opposed to fulfilling a lifelong dream of home ownership), they charge higher interest rates. Just like a residential mortgage, when you buy commercial the lender wants to know that you’ll make good on your payments and what better way to determine your willingness to keep on top of your payments than to look into how you treat your existing (and past) debts.
  
  Historical and pro forma operating statement
  
  

  You may decide you’re going to put 50% of the purchase price down on a property, you may have the best credit on earth, but at the end of the day if you’re acquiring an investment property and the property is not generating adequate income to cover the loan, there’s only so much a lender’s going to be willing to do. Now, it would be untrue to suggest that whenever you purchase an investment property the lender must see positive income in order to lend. That is an entirely oversimplified way to look at it, but it is fair to say that the lender wants to know how the property has performed from an income standpoint the past several years, and how the property can be expected to perform in the future. And depending on the property’s performance, the lender may want you to tell a better “story” as to how you’re going to get this property to operate better (i.e., produce more income).
  
  Investors should be careful when reading a company's pro-forma financial statements, as the figures may not comply with generally accepted accounting principles Generly Accepted Accounting Principles (GAAP). In some cases, the pro-forma figures may differ greatly from the those derived from GAAP.

  
  Business Plan, Performance, Etc. (buying property for business use only)
  
  

  When you have no intention of using a commercial property to generate income, you’re typically talking about using it as part of your business. When you try and secure a commercial real estate loan for a business, you’ll run into similar questions from the lender about the performance of the business you operate (or are buying) just as you would about the performance of the property you’re buying. The lender will want to know the net income of the business, they’ll want to know that you’re capable of running that type of business, they’ll want to know that there’s a history of generating the types of revenues and profits that will enable you, the borrower, to make your monthly loan payment.
  
  This list is not meant to be exhaustive by any means. Each property comes with its own special nuances, which often dictate lenders asking for additional information for them to even consider making the loan. However, you should, at the least, plan on having the aforementioned information.