3 Basic Principles of Commercial Real Estate Financing
Finance your commercial real estate today with these three basic principles. While many investors and small business owners may struggle to secure the financing they need for their real estate, you can position yourself to receive dynamic funding at great rates with these three simple tips. Whether you need a few thousand dollars or a few million dollars, these three principles allow you to improve your application and receive the financing you need to make your business grow.
Credit Score
The first principle is to build a solid credit score. Whether you work on your business score, personal score or both, your real estate business venture will require a high score in order to receive the funding you need. Business loans, lines of credit, mortgages and even some private funding bodies all look to your credit score to determine whether you’re reliable enough to loan the capital you need.
There are a number of ways to improve your credit score. Having access to more lines of credit and using them responsibly is a great way to show your financial responsibility. Consider taking out lines of business credit, applying for personal credit cards or paying off any outstanding debt. Using credit responsibly is the best way to build your score and attract better loan options in the future.
Cash Flow
Once you purchase commercial real estate, what’s your cash flow situation? Whether you’re flipping a home, renting a property or buying a storefront for your thriving convenience store, it’s essential to clearly communicate your cash flow situation to your financial institution. Spell out exactly how you expect to grow your business, what your long-term and short-term plans are with the property and how you expect to reliably repay the loan in the given term. This will help speed the process along and convince the financial institution to approve your loan.
Collateral
Finally, a commercial real estate mortgage or business loan for renovations requires collateral. Even business owners with the highest credit scores still need to provide collateral in the event of their defaulting on the loan. Requesting a loan that can be covered by the value of the property or other assets you own can help convince a lender that they aren’t taking a huge risk in loaning you the financing you need. Most real estate loans are backed by the property itself, but you can also gain additional financing for remodeling by refinancing your home, another commercial property or by backing a loan with valuable equipment from your business.
