A Commercial loan is a debt-based financing agreement between a company and a financial institution. Owning or purchasing a commercial property comes with significant expenses, this is why smaller firms generally rely on alternative real estate financing for their commercial properties.
If you are in need of alternative real estate financing for your commercial property, here is everything you need to know to get approved.
Getting Approved For Commercial Financing
Commercial financing is usually required from a company or firm, which is why in order to attain alternative real estate financing for a commercial property the borrower needs to meet stringent requirements.
Due to the additional risk, commercial loan conditions are less flexible than those of a conventional mortgage. Commercial loan interest rates are also much higher than residential loan rates. It is also difficult to meet the key requirements and access credit and income reports, proof of down payment and other such requirements.
The terms of a commercial construction loan in Canada are determined by the type of business and the property you wish to purchase. Because this is a complicated field, you should seek the advice of a specialist, such as a solicitor or chartered surveyor. With their expert help, getting commercial financing can be made simple.
To get approved for alternative real estate financing borrowers usually need a great debt-to-income ratio. The ratio of cash available for the required loan payments is usually a lender’s main criterion to ensure they receive their payments accordingly. Borrowers with lower debt to income ratios are more likely to get approved for a loan.
Lenders will also require proof of your business’s creditworthiness as well as a stable personal credit score. There are lenders that may accept applicants with a bad credit score, one of them being Freedom Capital.
Commercial lenders prefer companies stable companies with a lucrative income. Smaller companies usually have to provide a business strategy or basic information about the company and its goals. Some lenders also impose a minimum net worth requirement. This is to ensure the borrower’s authenticity.
When it comes to down payments, commercial properties require a larger sum. While residential properties and typical mortgage down payments range from 20 to 30 per cent, commercial financing down payments can go up to 4 per cent. A borrower’s risk profile also has a direct impact on the down payment.
If these basic requirements are met, borrowers should quickly get approved for alternative real estate financing. The terms, requirements, and application process of your mortgage heavily rely on the lender. This is why borrowers tend to opt for a private lender.
To make things easier for you, consider employing a commercial mortgage broker. Mortgage brokers know the market and can help you find the best lender with a great deal. With the right broker by your side, you are almost guaranteed great alternative real estate financing for your commercial property.