Purchasing a commercial property in Lafayette is a major commitment. Whether you are purchasing a new commercial building or expanding onto your existing one, it is usually financed by a commercial real estate loan. The following article will help explain the process and your options no matter if you are a first time business owner or own multiple facilities.
Getting A Commercial Real Estate Loan
When purchasing a commercial building, there are specific real estate loans and requirements. Commercial lenders in Lafayette require that the property will be owner occupied. This means your business will take up 51% of the building you are planning to purchase.
What Lenders Look For In A Commercial Real Estate Loan.
Commercial real estate lenders have a certain criteria before they will approve a loan for your small business. It is important to be aware of these criteria before approaching a lender. These three requirements are:
- Your Business Finances:
Real estate loans are scrutinized more in-depth than the average residential mortgages. This is due to small businesses are considered risky and have a failure rate of 20-50%. Lenders will need to review your book to make sure your cash flow can repay the loan. Another item they will check is your business’ credit score.
- Personal Finances:
With small businesses you usually have one owner or partnership. The lender will review your personal credit score and history to see if you have had any bankruptcies, foreclosures, liens or anything else negative on your credit. If you or your partner have a low credit score you may not be approved.
- The Property Itself:
The property that is being financed will be the collateral for the loan. The lender will attach a lien to the property and will repossess it if you do not make your payment. The value of the property will also be taken into consideration. The lender will usually let you borrow 65 to 75% and you will have to put up the remainder.
Preparing To Apply For A Commercial Business Loan
It is good to be prepared ahead of time, so that when your commercial real estate agent finds you the perfect property in the perfect location you can jump on it immediately. So it is advisable that you have the following available to take to the lender:
- Third party appraisal.
- State certification as a limited liability entity or corporation.
- Your business plan and owners/partner’s management proficiency and commitment.
- Cash flow projections for the term of the loan.
- The business books, records and financial reports for five years or business inception.
- All business tax returns, five years or less.
- Credit reports of the owner/partner and business.
As you can see there is a lot involved in purchasing or expanding a business in Lafayette. At Titan Lafayette Real Estate, we believe business owners do not have time to deal with the stress of searching for commercial properties to meet their needs. Our experience, skills and connections will get you the results you need and the requirements you want. Contact us today to see how we can benefit your business needs.