If you’ve bought a primary residence, you may recall getting “pre-approved” up to a certain dollar amount from a lender of choice before diving into the hunt of houses. Not so with commercial lending! Due to the vast diversity of commercial real estate types and uses compared to single-family residential, commercial lenders generally won’t make a commitment until reviewing an applicant’s financials in combination with a specific property and a proposed use. This can make it difficult to start the search with a realistic budget in mind. Fortunately, there are a few common rules of thumb such as loan-to-value and debt service coverage ratio that can be a help. In addition, I'm grateful to have cultivated relationships with a number of quality commercial lenders that are willing to do some up-front review with clients and provide expert guidance about what will and won’t likely be successful with underwriting. It’s my pleasure to facilitate such connections for my clients and help ensure they make informed and empowered decisions on the lending front.
Another key difference, depending on the commercial forms utilized, is that it can be acceptable for a Buyer to go under contract on a property naming the general type of financing but not a specific lender for the transaction. This allows experienced Buyers who already have a good idea of what they qualify for to explore loan terms offered by multiple lenders prior to finalizing the loan commitment and closing on the purchase. The lender selection process along with any specified lender requirements, such as an appraisal and environmental review, all must to occur within a pre-determined financing contingency period so there’s still accountability to the Seller. This represents a lot to accomplish so I encourage partnering with lenders who have a proven track-record for effective communication and efficient coordination (which does not always correspond to the lowest rates).
There are many more considerations when it comes to financing your commercial property such as maintaining positive leverage, building and accessing equity, possible SBA or seller-carried financing, lease vs. purchase analysis, projecting basic tax impacts and measuring rates of return in light of different financing options. As a CCIM, it’s my privilege to offer a robust level of analysis while still staying in my lane and helping identify other experts who can round out your team. Let's get started!
Let's discuss your needs so I can provide you with a personalized proposal.
BOOK A CONSULTATION
