You need money to begin a real estate business or expand your home. But “commercial loan applications” can be a tricky world to navigate. Many “real estate investors” find this process difficult, which leads to annoying delays and missed opportunities.
If you follow the steps in this blog, filling out your “commercial loan application” will be easier and faster. We’ll discuss essential steps, common mistakes, and how to prepare to succeed.
Our company has been underwriting loans for 30 years and is a “Senior Housing lender” and a “financial consulting” firm. We know how to get money for various real estate projects, from building new homes for seniors to fixing old ones. We connect lenders and buyers, which helps you get the cash you need faster.
Understanding the Landscape of Commercial Loans
What is a Commercial Loan Application?
There is a difference between a “personal loan application” and a “commercial loan application.” Loans for personal use are used for individual things. In contrast, loans for businesses and real estate investments are used for capital. This group has nursing homes, assisted living facilities, memory care units, new buildings, mixed-use projects, and empty land. Business finances, land values, and the laws governing business deals are complicated. Hence, the application process is one of a kind. To get commercial financing, you must show a thorough business plan, how much money you expect to make, and collateral.
Traditional Banks vs. Alternative Lenders
Real estate investors usually have two main choices when getting a business loan: traditional banks and alternative lenders. Some of the strict rules that traditional banks have are a lot of paperwork, good credit, and security. Getting loans from them can take a long time, and their regular loan choices might not be flexible enough for one-of-a-kind or urgent tasks. It’s hard for many people to get loans because traditional bank forms are strict.
On the other hand, private and correspondent loans are more tailor-made and customizable. As a correspondent lender, we work with a network of private lenders to give you more loan choices. You can also get approved much more quickly. When people need money, we connect them with sources of cash that they might not be able to reach through normal channels. This gives lenders more freedom to make loan products that fit the needs of all customers, even those who don’t have the best situations. A “table lender” puts people who need money and people who have it right next to each other, making this link even easier.
Types of Commercial Loans We Can Assist With
We offer many commercial loans that can be used for various kinds of real estate purchases. Our bridge loans, hard money loans, and DSCR loans can help you quickly get the money you need. We can also help you get regular-term loans, USDA B&I loans, SBA loans, FHA business property investment loans, construction loans for new buildings, and SBA loans. We offer no-doc, lite-doc, and stated income loans if you want to speed up the process. Many types of people can use these loans because they are open.
The Foundation of a Strong Commercial Loan Application
Financial Preparedness: More Than Just a Credit Score
Your “commercial loan application” needs to show that you are financially stable in more ways than having a good credit score. Lenders pay close attention to both your personal and business credit scores. But lenders look at more than just them. You have been good with money if you have a good credit score. Pay your bills on time, get rid of debt, and often check your credit report for errors to improve it. However, lenders pay close attention to how well your finances generally do. This means carefully reading your company’s financial records, such as its balance sheets, income statements, and cash flow statements.
These files show you how profitable and adaptable your company is. Also, you need correct and complete tax returns (usually from the last two to three years) to show how much money you made and how much you spent. These papers show everything about your finances and ability to repay loans.
Project Viability: Proving Your Investment’s Worth
Besides your money, the most important thing is that you can do your job. Lenders pay close attention to how much money you can make from your building job or real estate business. This includes a complete market analysis that looks at things like demographics, economic trends, and the properties that are similar to the one being sold, as well as a full property analysis that includes specifics about the property’s location and a professional evaluation to find out how much it’s worth. Knowing how your area’s real estate market works is essential.
For owner-occupied buildings or businesses already open, you need a well-organized business plan or executive summary explaining your strategy, management team, and how you expect the company to run. To show that the investment might be profitable, you need pro forma financials, which show how much money you wish to make and spend.
The Loan Value (LTV) number is significant to this analysis. This number looks at how much the loan is compared to how much the property is worth. It changes how risky the investor thinks the loan is, which changes the terms of your application for a business loan. Most of the time, a smaller LTV means that the application is more critical. The LTV for a house worth $1,000,000 is 70% if you want to borrow $700,000.
Your Experience and Track Record
Lenders want to see that you have used your money to put in or build real estate before. Make sure people know about your success if you run these projects well. Include a complete resume or sample of your work to show you can handle and carry out real estate projects well. New business real estate investors must show a strong, well-thought-out plan. They should also work with partners or teachers who have a lot of experience and can teach them. The lender thinks there is less risk because of this.
Asset-Based Lending: An Alternative Perspective
People with poor credit or having trouble getting standard loans can try asset-based lending instead. When someone applies for this loan, the lender looks at more than their credit score or cash flow to decide how much to lend. For real estate owners, the value of their home or a big building project can be the main thing that helps them get money. This method works well for people with a short or bad credit history, but a lot of equity in their assets.
Step-by-Step Guide to Streamlining Your Commercial Loan Application
Step 1: Define Your Needs Clearly
Clearly stating your funding requirements is the first and most crucial step in making your business loan application go more smoothly. It’s not enough to just say you need a “money loan.” You need to spell out the specifics of your project: What kind of land are you buying or building? Is it empty land, a brand-new building project, a fix-and-flip business, or a fix-and-hold plan for long-term rental income? Do you want to buy mixed-use properties or specialized assets like student housing, assisted living facilities, memory care facilities, nursing homes, or properties for seniors? When it comes to financing, each of these types of land is different.
Next, figure out how much money you need by adding up the costs of buying the property, fixing it up, running the business, and any savings you have. Lastly, decide how long you want the loan to last. Should you get a long-term mortgage or a short-term bridge loan? Making these criteria clear will significantly reduce your choices and help you focus on the best loans.
Step 2: Gather All Required Documentation in Advance
Forms that aren’t filled out can cause delays in the application process. To avoid this, list all the papers that might be needed and ensure you have them before applying. Personal and business tax returns (usually for the last two to three years), bank statements, a detailed business plan or executive summary, property appraisals, market analyses, and any relevant environmental reports or permits are usually included in this checklist. Carefully put these papers in order, in digital folders, making sure they are easy to find and clearly labeled. This proactive method will help you save a lot of time and stress.
Step 3: Understand Underwriting Expectations
With 30 years of experience as underwriters, we know how important it is to understand what they’re looking for. Underwriters look at all the risks involved in a loan application. They look at your project and your finances to figure out how likely you will be able to repay the loan. They look at your credit score, the feasibility of your project (including where it is located, how much demand there is for it, and how much money you expect to make from it), and your experience in the real estate business.
They want a straightforward way to make money and an intense way to get out of the company. By knowing what is expected of you, you can prepare for possible questions and fix any problems with your application before they happen, which will help you make the best case.
Step 4: Choose the Right Lender for Your Project
The most important choice is selecting the right loan. Traditional banks offer standard loans but usually have strict requirements and take longer to approve. A senior housing lender specializing in that type of lending is very important for niche markets like this one. These lenders know a lot about how these properties work and how much money they make, which makes them more likely to accept your commercial loan application and offer good terms.
You can’t say enough good things about working with a network of private lenders. Even if you have bad credit, private lenders often offer more options, faster processing, and solutions tailored to your project needs than traditional banks. In some situations, we can help people get a cash loan faster than most standard banks in as little as 48 hours. You have the best chance of being approved because we put you in touch with the correct cash source.
Step 5: Present a Comprehensive and Professional Application
Once you have your paperwork, you should present your business loan application concisely and professionally. Make sure that every part is complete and correct. Focus on the good things about your idea, like how it could make you a lot of money, where it will be located, or how many tenants you already have. If there are any weaknesses, you should deal with them right away and give a clear explanation and plan for how to fix the problem. A well-organized and convincing application shows that you are skilled and pay attention to detail, which makes the lender trust you.
Step 6: Be Responsive and Proactive During the Process
The process of applying for a loan is often repeated. Lenders and brokers can ask for more details or information. To keep going, you need to be both responsive and aggressive. Answer all questions immediately and send any paperwork that is asked for right away. Keep the lines of communication open and honest with your provider throughout the process. This shows that you are committed and helps build trust, which will speed up the approval process for your business loan application.
Common Pitfalls to Avoid in Your Commercial Loan Application
Filling out an application for a commercial loan can be challenging, and a few typical mistakes can stop you in your tracks. The most significant waste of time is sending in missing or wrong paperwork. If you don’t have financial records, tax returns, or data that isn’t consistent, you will have to wait and be asked for information more than once.
Another common mistake is having high hopes for loan terms, interest rates, or Loan-to-Value (LTV) ratios. Find out what the market is like now and be ready for terms that align with industry standards, not just your dream situation.
Not being able to clearly communicate with your provider or partners can also be harmful. Provide information on your own, answer questions quickly, and ask questions if something isn’t clear. It’s also important not to read the small print in the loan deal. Before deciding, ensure you fully understand the terms, conditions, fees, and due dates.
Lastly, bad credit management can be a big problem, even if you have a lot of assets. Even though asset-based lending is flexible, a history of late payments, defaults, or high debt can still raise red flags and make it harder to get a loan. Taking care of credit problems before they happen will help your application for a business loan.
Why Partnering with a Specialist Matters
It’s best to work with an expert when figuring out how to finance business real estate. Since we’ve been insurers for 30 years, we are the best at what we do. We ensure that real estate investors like you can get money from many different places by using an extensive network of more than 200 private loans and buyers. We offer customized options because we understand the unique needs of all types of building projects, from starting from scratch to complicated money deals and senior home properties. To help people get the money they need, we put them in touch with lenders.
You can get help quickly and easily with our streamlined method and direct loan access. This will save you time and money. Our full range of financial planning services can help you with your real estate business plans.
Referral Programs and Partnerships
We get things done together, and our connection programs are great for new and experienced agents. Through our exclusive and non-exclusive partnerships, you can connect us with people who need commercial real estate financing and earn commissions. This lets you give more services and make money. It’s essential to have good ties with people in the field.
Conclusion
A simple way to apply for a commercial loan is essential for making money with real estate investments. You have a much better chance of getting the cash you need if you know what’s going on, carefully prepare your finances, and clarify how your project will work. As a dedicated money loan and financial advisor, we’re here to make this journey, which can be hard to understand, easier. Do not let the complicated nature of business finances stop you from starting your next project.
Get in touch with us right away for expert financial advice, to talk about the needs of your unique project, or to learn more about our full range of lending options. Let us help you reach your real estate goals by being the partner you can trust.
FAQs
What is the typical down payment required for a commercial real estate loan?
Commercial real estate loans usually need a more significant down payment than household mortgages, between 20% and 35% of the property’s purchase price or appraised value. The exact amount required depends on the lender and the type of loan. The same percentage relies on things like the type of property, the borrower’s credit score, and how risky the lender thinks the loan is.
How long does it typically take to get approved for a commercial loan?
The time it takes to approve a business loan can vary greatly. The process can take anywhere from 30 to 90 days for regular loans from regular banks, and sometimes it takes longer. As the blog post suggests, working with private or correspondent lenders can speed this up a lot. Certain types of loans can be approved and given out in as little as 48 hours, depending on how complete the application is and how complicated the deal is.
Can I get a commercial loan with bad personal credit if I have substantial assets?
It is possible, especially with loans based on assets. Even though your credit score is considered, the value of the collateral (your real estate assets) is given more weight than your credit score in asset-based loans. This method provides people with bad credit another option for getting loans if they have a lot of value in their home or a property worth a lot of money.
What are the main differences between bridge and hard money loans?
Hard money loans and bridge loans are both short-term ways to get money, but they are not precisely the same. Often, bridge loans are used to “bridge” the gap between a short-term financial need and a longer-term, more permanent loan (like while waiting for a long-term mortgage to finish). Hard money loans are short-term, but the property’s value backs them. They are often used for quick purchases, renovations, or situations where standard financing isn’t possible because of time constraints or borrower qualifications. Because they are riskier, hard money loans usually have higher interest rates.
What are closing costs for a commercial loan, and who typically pays them?
Origination fees, appraisal fees, environmental reports, legal fees, title insurance, and filing fees can all be part of the closing costs for a commercial loan. These fees are usually between 2% and 5% of the total loan amount. People who are borrowing money typically have to pay these fees. Still, some may be able to be negotiated, and in some cases, the seller may pay some of them or add them to the loan.
