Commercial Land, Mixed Use and Multi-Family Commercial Loans Guide
Key Credit Requirements and Financial Ratios
Credit Score:
- A good personal and business credit score is essential. Lenders typically look for a credit score of at least 680, although higher scores (700+) can improve your chances and potentially secure better terms.
Loan-to-Value Ratio (LTV):
- LTV ratio determines how much loan amount you can get relative to the property’s value.
- Commercial loans often have an LTV of 65-80%. This means you might need to provide a down payment of 20-35%.
Down Payment:
- Typically ranges from 20-30% of the property value.
- Larger down payments can improve your chances of loan approval and might secure better interest rates.
Acquiring a commercial property for your business is a significant step that involves various complexities and considerations. This comprehensive guide outlines what you need to know about commercial loans to make an informed decision.
Liberty Capital will help guide you throughout the process and our network of lender will be accessible to you during the approval and funding process. You will be working with a fully licensed commercial loan broker. We don’t do residential, or primary real estate loans.
Steps to Prepare for a Commercial Loan Application
- Assess Financial Health:
- Review and improve your credit scores.
- Ensure your business financials are strong and up-to-date.
- Gather Documentation:
- Compile all necessary financial statements, tax returns, and legal documents.
- Obtain a recent property appraisal and, if necessary, a broker’s opinion.
- Choose the Right Lender:
- Research potential lenders (banks, credit unions, online lenders, SBA lenders).
- Compare interest rates, loan terms, fees, and lender requirements.
- Prepare a Strong Application:
- Ensure all paperwork is accurate and comprehensive.
- Write a compelling business plan and loan proposal.
- Consult Professionals:
- Consider working with a commercial mortgage broker.
- Seek advice from financial advisors and legal professionals.
Post-Approval Considerations
- Property Management:
- Decide if you will manage the property yourself or hire a property management firm.
- Maintenance and Insurance:
- Regular maintenance is crucial to preserve the property’s value.
- Obtain adequate property and liability insurance.
- Monitoring Financial Performance:
- Regularly review your financial performance to ensure you can meet loan obligations.
- Maintain a healthy cash flow and keep an eye on market conditions.
