3 Commercial Loan Blunders to Avoid

Small businesses often need commercial real estate loans to purchase property for their company. These mortgages can also be used to refinance existing loans or to get funding to redevelop properties a firm already owns. Whatever the reason, securing the loan is an important part of achieving the goal. Here are three important mistakes to avoid when applying for a commercial loan.

1. A Lack of Cash

Most commercial real estate loans require a substantial amount of money for a down payment. Yet lenders will also want business applicants to have plenty of cash reserves designated for investing in the property, either for maintenance or renovations, depending on the purpose. Be sure your company has funding to spare on top of the money that will be required for the commercial mortgage payments.

2. Failure to Shop Around

Even if you have a favorite lender, it is always good business sense to check around with other lenders to see what they can offer. Not only may you find better rates and terms elsewhere, you may also find different loan programs that may fit your company’s needs better. And be sure to check out all the options the Small Business Administration (SBA) has to offer.

3. A Lack of Business Plan and Documentation

Being prepared with a sound business plan and all the required documentation is a must for proving to a lender you are worthy of commercial real estate loan funding. Lenders will want to know exactly how you plan to use the money, how you intend to repay the loan, and how your business can support the new loan. Having all your tax returns, bank statements, and other important paperwork ready to go up front will also help the process move along more smoothly.

Preparation and planning will help you steer clear of these three common commercial loan missteps.


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