5 Areas Investors Can Qualify for Commercial Lending

Qualifying for commercial real estate loans requires a specific set of requirements. Many first-time investors mistake residential and commercial loan requirements. The first step to investing in commercial properties is to learn the difference between qualifying for a commercial and residential mortgage. To improve your application for commercial investments, find out how to improve these five key areas.

Total Income

Whether you’re on your own or an employee, you’ll need to provide personal financial statements in order to qualify for a commercial loan. Lenders want to know that you have the finances and assets available to make timely payments. If your investment doesn’t provide immediate cash flow, you need an alternative way to pay back your debt. Additional income can help cushion any financial risk.

Liquid Assets

Money in the bank is only important to commercial lenders if you have access to it. If all your assets are tied up in 401ks and other areas that aren’t liquid, you may not qualify for a commercial real estate loan. Be sure you have enough capital available to make monthly payments, whether or not your investment property generates income.

Industry Experience

Just like any other industry, breaking into the real estate industry comes with a learning curve. If you’ve never owned rental properties, you may want to consider hiring a property manager and transitioning into management. Either way, you’ll want a solid plan concerning the ownership and management of your real estate portfolio.

Net Worth

Liquid assets aside, it’s also important to state your net worth. Typically, commercial lenders aren’t likely to offer a loan more than your current net worth. If you want to take out a two million dollar loan for a series of apartments, you’ll need to have at least two million dollars in net worth.

There are certain instances when other areas of your application will override this rule of thumb. However, if you’re considering taking out a loan significantly higher than your net worth, you’ll need a strong application in other areas.

Personal and Business Credit Scores

Finally, although your credit score holds far more weight in residential mortgages, commercial lenders will still want to look at your personal and business credit scores. This isn’t as essential a criterion as in personal mortgages, but an exceptionally low credit score, typically under 500, will make it difficult to receive the funding you need. Once you’ve taken all of these factors into account you’ll be ready to deliver a competitive commercial real estate application.


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