The commercial loan process is quite different than that of home mortgage. Firstly, commercial property loans are not usually backed by a government entity, so lenders will tend to charge higher interest rates than they normally would for a home loan. Secondly, many lenders will evaluate the specifics of your business as well as the commercial property.
When applying for a commercial property loan, do not expect the process to be similar to that of the loan you secured for your residence. Here are some tips regarding the commercial property lending process.
1. Apply As Early As Possible
Commercial lenders tend to exaggerate their speed, so the process may end up taking a lot longer than initially expected. Start early, so that the waiting time for the loan process to be completed will not hinder your project from moving forward.
2. Don’t Order the Appraisal Yourself
Banks are not legally allowed to accept an appraisal that you order yourself; it must be ordered by the commercial lender. This way, you will not end up paying twice for an appraisal. Moreover, wait until the commercial lender hands you a term sheet before proceeding with the appraisal. The term sheet will give you a clearer sense of what legal and financial agreements you are making.
3. Get an Environment Study of the Property
If a property is contaminated, thus forcing the lender to foreclose, the lender is the one who pays for the clean-up costs. Any commercial lender will absolutely make sure the property is all clean before issuing a loan. Be sure to get an environmental study done (this includes a toxic report, among other things), so you and your lender can both be aware of the general state of the property.
4. Don’t Ignore Other Options
Many institutions offer special programs and platforms for borrowers seeking commercial property loans. Do not fret if the first lending institution you apply to does not want to follow through with the loan. Keep looking!
Biz2Credit helps companies secure financing for commercial property loans. Visit https://www.biz2credit.com/business-loan/commercial-real-estate-financing.