Nuggets of Advice on Commercial Lending

Posted by Aazdak Alisimo

Many people assume that the world of commercial lending is akin to what they find in residential and personal lending. Unfortunately, it is not. While it seems the same upfront, it is really like the difference between speaking Chinese and English.

One of the keys to successfully obtaining commercial financing is knowledge. The more you have, the more likely you are to get the money you desire. Here are some tips that can get you over the hump.

The tax return tells everything and the underwriter is going to want to see it. Actually, the last two years. The returns need to be signed by you, even if they are copies. If you filed an extension, include it with the documents submitted.

The underwriter is going to want to view your financial situation. Prepare personal financial statements for the year that are up to date. Do the same for your business. The statements should be up to date within 45 days of submission.

A bank will not accept an appraisal from the borrower. That doesn’t mean it isn’t wise to get one on your own in certain situations. Getting an accurate appraisal can really help you grasp the value of a property as well as good and poor aspects.

If you are making real estate investments, a good attorney is worth his or her weight in gold. You want an attorney that specializes in real estate. They will advocate your position and can make all the difference in keeping you out of a bad spot.

If you are buying rental properties, get copies of the lease agreements and include them with the submitted documents. Also, make sure the lease statements match the total rent being claimed for the properties. If not, state why this is the case.

If this is your first financial investment, the small business administration should be a place you visit. This is one of those rare government agencies that actually helps small businesses. Definitely take a trip and talk to the reps there.

If your are borrowing money as a corporation or limited liability company, make sure you have a certification of active status from the Secretary of State. It can take months to get this from some states, so plan ahead.

It is tempting to brush over the problems in your finances. Don’t. Even if you get it by the lender, it can come back to haunt you. If you later have financial problems, you can be the lender will be all over you trying to recover its financial output.

Appraisals are an area of confusion and unwarranted expense in commercial lending. The rule is simple. The lender must order the appraisal. Don’t let a broker or someone else talk you into paying for one not ordered by the bank. It will be worthless.

The commercial loan application is much more complex than residential loans. Make sure that you read up on the subject and understand exactly what you are getting into and what is required of you. Winging it is a complete mistake in these expensive transactions.

Tags: Mortgages

Under Mortgages Tags: Mortgages