Top 8 Commercial Real Estate Loan Mistakes

A commercial real estate loan is a significant financial transaction in any businesses life.  To increase your chances of successfully obtaining the loan, it is important to avoid these common mistakes:

1.  Not thoroughly researching all of your options.  You need to ensure that you have done your due diligence and reviewed commercial loan terms from different banks and other commercial lenders.

2.  Not selecting the best professionals to assist you.  You should hire a commercial real estate attorney and an accountant who understand commercial real estate.  This is not the time go to with friends of the family or relatives who practice it part time.

3.  Failing to have a definite plan.  Lenders want to see that you have a plan in place for using the money.  They also want to see the timeframe in which you anticipate completion of the planned project.

4.  Failing to have a business plan.  It is always advantageous when seeking a loan, or any type of funding.  The plan must have all the necessary operating and financial data.

5.  Not having cash ready to put into the project.  Before you apply for a commercial real estate loan, you need to make sure you have some available cash on hand.  Commercial lenders want to see that you are investing your own money to cover a percentage of the project.

6.  Not reviewing your companies financials.  You should review your companies financials to make sure that while you are paying back the loan you have enough money to properly run the business.

7.  Going straight to a familiar lender.  Yes, it is good to have a rapport with a lender, particularly when you need a loan.  However, there are new real estate products offered constantly and banks differ with their “appetites” toward certain loans.   Your bank may like your loan request, but the bank down the street may “love” it and would offer you better loan terms and interest rates.

8.  Not having your ducks in a row.  Make sure you have all the documentation that the lender would expect, and be prepared to show why the property or project makes fiscal sense for your company.

By avoiding the eight mistakes above, you will have a much greater chance of getting your loan approved and a much better borrowing experience.

Good luck!

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