How to Get Commercial Lending and Funding

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How to Get Commercial Lending and Funding

September 3rd, 2008

When you are ready to apply for a business or commercial loan for the purpose of your business, whether it be for purchasing a new property, making improvements to existing properties or for the daily functions of your business, you need to be aware of how to get commercial lending and funding and what you need to have in order to get the loan that you need.

There are some basic values that weigh heavily on a lender when making a decision to extend a loan to a commercial customer. When you want to get commercial lending and funding, one of the basics is cash flow analysis. It is in this phase when the commercial lender takes a complete analysis of the cash flow situation of the applicant. The property that is being considered has to have enough cash flow to be able to cover all of the expenses of the property that already exist as well as be able to cover the new expenses of the loan payment.

Another important principle is the loan to value ratio or the LTV. This is used in commercial lending and tends to be very conservative. Commercial lenders will typically require a minimum down of 20 percent of the purchase price at the time of the loan. The remaining 80 percent will then turn into the loan amount for the new property. If an appraisal is conducted on the property and it shows that the value is actually less than the purchase piece, the lender can then use the number that is lower to determine the amount of loan that will be approved.

When you want to get commercial lending and funding, another important basic principle is the creditworthiness. In order for commercial loans to be given, the applicants must have a high credit score and enough credit to get the loan. If the applicant has been in business less than three years, the borrowers themselves will then need to be evaluated. Banks and lenders can handle this differently, but you need to be prepared to have the proper documentation and information ready to give to them if they ask for it.

One other important principle is the property analysis and fair market value. In this, the fair market rent will be analyzed and reviewed. In this step, there can be an appraisal done of the property and those around it to determine whether or not the proposed property is worthy and has enough value to be financed for the amount purchased. There can be a number of different factors that goes into this step. Each lender has their own sets of requirements for guaranteeing new loans. Some may require more than others but you need to know that an appraisal will most likely be conducted.

When you are ready to apply for commercial lending and funding, be prepared and have everything you need ready in advance to show them. Be professional and have a plan to show them.

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