Business owners may purchase commercial property to set up a new facility or to expand their existing facility. Usually, a commercial real estate loan is taken for this purpose. Qualifying for a commercial real estate loan is not easy. Majority of commercial real estate loan applications are rejected by the bank. The reason for this is failure to meet its eligibility criteria.

In this post, we’ll highlight a few important tips that can help borrowers get approved for a commercial real estate loan.

1. Demonstrate Profitability

The most important requirement for a commercial real estate loan is having a growing and profitable company. Banks will view the profit records of a business and if they see low profits, they will likely reject the loan application. Furthermore, banks will also check the borrower’s credit score. If the borrower’s credit score is too low, they will likely reject the loan. Therefore, borrowers should demonstrate profitability and maintain a good credit score. They must have records to prove that their business is profitable and they can pay back the loan.

2. Know Your Real Estate Needs

Banks won’t give a loan to a borrower who doesn’t know their space needs. They want to see that the borrower has a solid plan and know their real estate requirements. A borrower must figure out their budget, square footage and desired location. In addition, they should decide whether they’ll buy a property or lease it.

When budgeting, borrowers often ignore the extra charges associated with the purchase of property. This can impact their loan application. Borrowers should consider all the extra costs like renovations, legal fees and production downtime because of the transition.

3. Prepare the Documents

Banks will require the borrower to provide documentation related to their business. Borrowers should gather essential documents like financial statements, business plan and details of the property they are interested in. If borrowers fail to provide the documents required by the bank, their commercial real estate loan application will be rejected.

4. Determine the Conditions of Bank

Before a borrower bids on the property, they should meet the banker to determine the conditions of the bank. The bank may require the borrower to obtain building condition assessment, title search and appraisal. Failure to meet these conditions set by the bank can affect the borrower’s chance of qualifying for a commercial real estate loan.

The tips highlighted above will help a borrower qualify for a commercial real estate loan. However, if borrowers still fail to qualify for it, they should check out alternative loan options. At KLB Business Funding, we have several business loan options available for borrowers with lenient qualification requirements. Make sure to check these loan options out.