Lenders will want to be confident you can make the commercial property mortgage loans repayments since you will be utilizing the property for business purposes and paying the mortgage with income from those purposes.
Similar to conventional loans, lenders will assess your financial information to establish your pre-qualifying potential before you submit the application form. While conventional lenders often examine financial documents like income tax returns and bank statements to assess the viability of your company, the majority also need to view your business plan’s profits projections.
Security
When approving a loan, lenders want to be satisfied that the loan is appropriately secured by the asset you are borrowing against. Typically, this implies that you will need to have about 30% equity in the home, which means that if you’re purchasing, you’ll need to put down that amount to qualify.
Lenders also want to make sure you have the appropriate property insurance to guard against property damage. To make sure there are no unpaid liens or other claims against the property, lenders also do title work on the property and analyze the deed.
Income
Lenders want to be sure that you earn enough money to cover your monthly loan payments about your outgoings. Your debt-service coverage ratio, or DSCR, is one method of calculating this.
Your lender will want two years’ worth of tax records to verify your income, often including both personal and company tax filings. Together with personal papers like your passport and birth certificate, you will also need to provide the organizational paperwork for your firm and its operating agreement.
Credit ratings
For loans for commercial real estate, credit lenders frequently analyze corporate credit ratings. Lenders will frequently additionally ask you for a personal guarantee, which means they’ll also want to examine your credit.
Lenders will also want to know how long you have been in the company to evaluate your credit risk. Usually, you need to have been in operation for one to two years to be eligible for a commercial loan. The lender uses it as a means of ensuring your company’s revenue. This is significant to lenders since the revenue from your company will serve as the principal means of commercial property mortgage loans repayment.
