What You Should Know About Financing Commercial Real Estate

You can purchase commercial property for your own business or for the sake of investment property. Trying to purchase investment property in a commercial area can be a good idea because you can earn a return on investment in the form of rental income, resale of the commercial property, or both.

Before endeavouring to finance the purchase of commercial property, you should consult with your tax advisor and financial expert regarding your plan so that they can give you their expert opinion on the feasibility of your plan.

When you want to obtain a loan to finance the purchase of commercial real estate, you must first be sure about good credit rating. It is necessary to consult with a finance expert particularly if your score is not excellent because commercial properties are more expensive than residential properties and therefore require a relatively high credit rating.

The lender will make a thorough examination of your credit score and timeline and will require full documentation concerning your income and assets. If you intend to establish your own business in the commercial property, then the lender will be concerned about the success of your business and will take a look at all your financial statements. Lenders will provide a loan only if they are fully convinced about your financial situation because the risk is much higher for mortgages on commercial properties.

You will need to hire a property appraisal expert to find out the market value of the commercial property that you wish to purchase. Property appraisal is important because lending institutions naturally don’t want to give a loan that is greater in value than the fair market value, because in case of default the full amount of the loan cannot be recovered even if property is sold off because it has a smaller selling value than the loan amount.

While the interest rate is definitely important there are other numbers and conditions that matter such as:

• The loan-to-value ratio. This is the percentage of property cost that will be covered by the loan. For example an LTV of 75% means that the loan extended will cover 75% of the property value. Obviously, the higher the LTV ratio, the better the deal and any shortfall must be managed through your own resources.
• Amortization Period. This can vary from 15 to 25 years. A higher amortization period is more desirable because the repayments that you make every year will be smaller and that will be easier for your business to handle.
• The flexibility of the contract also matters. For instance, if for some reason you are unable to pay the full instalment amount, then there should be an option for payment on interest only (to offer you relief and time to recover).

This is important because since the amortization period is so long, there may be some ups and downs for your business.

• Upfront deposit amount. This is the amount of interest that is payable in advance. An exorbitantly high amount can greatly reduce your working capital and create associated problems for your business.

If you are looking for commercial real estate finance then we can offer you the most favourable terms and conditions such as 90% LTV, loans up to $10 million, small down payments, very quick approval and nationwide financing.

Contact us today

Post:            3702 Pratt Avenue Bronx NY 10466

Telephone:  (347) 755-2257

Email:          info@klbbusinessfunding.com