How to Get Approved for Commercial Real Estate Financing

After searching for the best commercial real estate options available to you, it’s time to submit an application and wait for approval. If you’re concerned about your financing becoming approved, follow these steps in improving your financing application.

Improve Your Credit Score

A major factor in becoming approved for a real estate loan is having a competitive credit score. Receiving financing with a low credit score is still possible, but it may affect your loan limit or interest rate. A great way to improve your application is to build up your credit score. Look for ways to improve your score, like taking out more credit, making timely payments and using less than your maximum available credit.

Increase Your Net Worth

Another key area you can improve your application is your net worth. Commercial real estate loans require you to have a net worth roughly equal to or greater than the amount of the loan you’re applying for. It’s difficult to receive a loan far larger than your current net worth. Future income is also a factor, so if you have a high income then you can sometimes take out a larger loan that your current net worth.

Create Liquid Financing

How is your working capital account? If you need to spend all your available resources on a down payment, this leaves you in danger of missing your first few loan payments. Try to keep enough cash in your account to afford your monthly payments, with extra to spare. Some lenders want to see a full year’s worth of payments to ensure you have the financial resources you need to pay your loan back in full.

Real Estate Experience

Finally, entering the commercial property industry requires an in-depth understanding of how to manage, renovate and own property. If you’ve never managed a rental unit before, your lender may be hesitant to fund your business venture. Look for ways to grow your experience and train in the industry to understand what it takes to be a successful real estate investor.

These are just a few key areas that you should hone in on as you build your application. No single answer will guarantee a loan will be approved, but building each of these areas will strengthen your application and increase your chance of a successful commercial real estate loan application. Look at each of these areas to find the best way to improve your application today.

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