Securing a commercial property loan is a lot different than getting a loan for a residential property. The factors that the lender weighs are similar, but the requirements for a commercial loan can be a lot more demanding. When reviewing your application for a commercial property loan, the lender will consider your credit history, the appraised value of the property, your debt service coverage ratio, and how much money you have for a down payment.
To secure a commercial loan, you need to have a strong credit history. To determine your financial reliability, lenders will also take a close look at your income and assets. If you plan on occupying the commercial space with your own business, they may even request a business plan detailing the potential profits of your company.
To determine the value of the property, the lender will order an appraisal. During the appraisal, they will check structural elements like the roof and the plumbing, but they will also look at the building’s likelihood of attracting tenants. To determine this, they may consider the building’s size, location, and accessibility. To increase your chances of securing the loan, you should select a property that is easy to reach with close transport links and a nearby pool of workers. Ideally, there should also be businesses around your desired property as these businesses will support your future lessees.
The lender will also consider your debt service coverage ratio. This is the amount of money that the property will generate compared to the monthly mortgage payment. Typically, lenders like to see ratios between 1.1 and 1.4. If you have a ratio of 1.4, it means that your property will probably generate $1.40 for every dollar that you pay monthly on your mortgage.
Although it may be possible to get a residential loan with little or no money down, it is virtually impossible to secure a commercial loan without a solid down payment. These loans are considered to be risky by many vendors, and they typically require down payments of at least 20 percent and sometimes up to 30 or 40 percent. The larger your down payment, the more likely you are to be approved for your loan.
Securing a commercial property loan can be difficult. However, with the right preparation, you can increase your chances of getting approved. With a positive credit history, a favorable appraisal, a good debt service coverage ratio, and an ample down payment, you will have all the pieces in place that you need to secure your commercial loan.
Serene Chua : (+ 65)98-199-199
B.Sc(NUS)Hons / CEHA-Certified
Email : email@example.com