Very often, businesses will seek out commercial loans when they are looking to expand their business, purchase new equipment or begin new projects. Much of the time, however, companies will fall short when it comes to understanding the process that is required when they are seeking the right entity to provide them with their loan. This often results in a complicated situation that can end in disaster. If you want to make sure that you have found the right commercial loan for your business, Abbey Mortgage has some tips for you. Continue reading below to make sure that you do not make the most common mistakes that businesses do when they seek out a real estate loan.
The beginning stages of getting a commercial real estate loan should always include a ton of research. You need to make sure that you have exhausted all of your options before you agree to or sign anything. We would suggest that you start this process by familiarizing yourself with commercial loan terms in general. You will want to follow this up by researching the terms that are offered by different banks and commercial lenders in your state. While many of the offers will look similar, being patient and researching all of your options will likely aid you in the commercial loan process down the road.
Using a Familiar Lender
Even if you already have a rapport with a lender in your area or one that you have used before, you may not want to jump the gun by simply choosing them from the get-go. Looking into other possibilities before heading to your favorite lender may benefit you in the end. New offers and products may have become available from other lenders since the last time you needed to take out a commercial loan.
Choosing to Not Get an Experienced Lawyer
Trust us. One of the most detrimental decisions you can make during this business venture is to hire a lawyer who is not experienced. Instead, make sure that you consult a commercial real estate lawyer that has a record of being able to negotiate real estate loans successfully. This will result in you being able to obtain the very best loan terms that are currently on the market.
One of the biggest mistakes you can make is to accept loan terms at face value. Negotiating is an important part of all business agreements, so why should this be any different? If you hire the right lawyer, they will ensure that you understand every little detail when you are reviewing your commercial real estate loan offer.
Not Having or Creating a Business Plan
Having a well thought out business plan is imperative when you are seeking a commercial loan or any type of funding for that matter. This can take a good amount of time to create, but once you have it set in place, you can ensure that the loan process will be much easier throughout. Included in your business plan should be all of the necessary financial information and operating data that lenders will need access to. This will allow for those lenders to evaluate if you are a responsible business owner who has reasonable goals for your company.
Not Having or Creating a Budget
You are much more likely to obtain your loan if you have a detailed plan for how you are going to spend the money over time should you get it. Having a timeline that will exhibit when you think the planned project will be complete is also another great way to ensure you get the loan.
Not Having Different Forms of Funding
You should always have cash on hand if you are applying for a commercial real estate loan. If you are blatantly not willing to invest any of your own money in a project, why would a lender want to spot you?
Not Looking at your Balance Sheet
You also want to make sure that you are able to repay the loan while also being able to run your business at the same time. Take into account your cash flow and liabilities before you enter a loan agreement. Without doing this, your business could be at risk.
Not Getting SBA Advisement
Don’t forget to communicate with the Small Business Administration (SBA) to see if there are any loans that they can help you to obtain. With a portfolio full of over 100,000 loans, this entity is the largest single financial back to business all over the country.
Being Less Than Prepared
Many people simply have no idea what they are getting into when they are trying to obtain a commercial loan. Make sure you have copies of your business’ financial statements from the most recent business year, or at least a draft of your finances. You should be more than prepared to show how and why your project is going to make sense fiscally.
Allow Abbey Mortgage and Investments to Help You
Before you apply for a commercial loan, you need to make sure that you have a good reason for doing so. If you cannot figure out what your purpose is, you should avoid the process entirely. If you need help articulating your purpose, Abbey Mortgage and Investments can help you to gather your plan. We have plenty of experience in helping growing Colorado businesses expand by loaning them the money that they need to do so. Contact us today to learn more about commercial real estate loans.