Applying for CRE financing may not be a simple process, but it carries significant rewards in the investment opportunities it provides. With commercial real estate, the owner is able to collect on rents from businesses and can profit from an economic upturn. If you own a shopping mall and rent to boutiques that grab national attention, you are likely to have a steady stream of income for some time. However, if one of your tenants goes out of business, that could spell disaster if you aren’t prepared.
Lenders have this in mind, and this is the reason they are careful to vet applicants for CRE financing, and choose those who have the best prospects for success. One way to make it more likely that your application is approved is if you can point to commercial real estate investments that have been remunerative in the past. If you lack experience investing in commercial real estate, you will need to draw up a convincing business plan to show that the investment is likely to succeed. Make detailed calculations of how much income your property is likely to generate each month or annually. Also, point out similar ventures in the area that have been successful.
Showing a clean financial history is important when applying for CRE Financing. If your company is relatively new, your personal finances will have more weight in securing approval. If you have not declared bankruptcy in the past few years, have a steady flow of income and have paid off your debts, approval is more likely. If your personal finances are spotty, you might have to go to a lender that charges higher interest rates, or secure the loan with personal assets as well as collateral.
If you have worked with a bank or a lender in the past for personal loans or a mortgage and if these debts have been paid, you may be a customer in good standing and have a greater chance of success at these institutions if you approach them for CRE Financing. The lender wants to know that you can be relied on to pay off the debt, and a past history with the bank or lender can compensate for a lack of experience in the commercial real estate space. Make sure you can show that the chances for success of the venture are strong through a business plan with detailed estimates. It helps to make sure you have enough capital to back you up so you aren’t hit by a downturn, and can pay off your loan no matter what the circumstances.