Commercial real estate loans are loans given to investors that want to purchase or build commercial properties like offices and business spaces. Only a few financially-endowed people can buy commercial properties without loans from banks or other lending facilities. If you aren’t one of them, one of the alternatives is to get commercial loans. However, it’s not a walk in the park.

Banks and lenders have specific guidelines that they use to determine if you qualify for financing or not. Many people fail to meet the criteria either because of ignorance or by assuming simple details required by the bank.

After reading this post, you'll understand the nitty-gritty of getting your loan approved and even take the bold step of applying:

1. 1. Understand How Commercial Loans Work

Before seeking financing from mainstream moneylenders, you should first understand how a loan works. Indeed, there are various types of financing and lenders. The lenders include; private lenders, hard money lenders, portfolio lenders, mortgage brokers, and conventional banks. 

Every lender has unique criteria for issuing loans. However, when you visit any office, there's a high chance that the person you talk to is a salesperson, and salespeople aren’t the ultimate decision-makers in issuing loans.

A salesman simply obtains your information and forwards it to the underwriter. The underwriter assesses the information provided by the salesman using various regulations, laws, and rules to determine if you qualify for the loan or not. At the underwriter level, your trading record comes into accounts, and the officials assess your ability to repay the loan. Typically, an underwriter is (purposefully) neither emotionally involved nor creative when determining your qualification. Therefore, to get the financing, you must:

• Convince the salesperson that you deserve the loan
• Persuade the salesperson to convince the underwriter that you qualify for the loan

Convincing the sales guy is simple; however, if you fail to provide tangible proof of your worthiness, it'll be hard to convince the underwriter, and you won't get the financing you need.

1. 2. Get a Good Sales Person Or A Mortgage Broker

You must get an innovative sales or mortgage broker when you want a commercial real estate loan. It’d help if you had an individual who doesn't easily say ‘yes’ or ‘no’ like a robot, but one who can strive to get your mortgage approved. 

A good, creative, and approved mortgage/salesperson will advise you on the requirements for getting financed. The requirements may involve obtaining a title search, an appraisal, a building condition assessment, and an environmental compliance certificate. When conducting this kind of due diligence, be keen to use the lender's approved mortgage broker to avoid incurring double costs. You can also ask around to know the favorite lender in your area.

Even though you may get the most innovative guy, getting your loan approved depends entirely on you. Your mortgage broker may not think everything for you. It’d help if you convinced the underwriter that you qualify for the loan.

1. 3. Convince Your Lender's Underwriter

It's important to understand that the lender must take a huge gamble to give you a loan, and they only like to take sure bets. You must demonstrate that approving your loan is a good gamble for the lender; otherwise, your application will be rejected.

Therefore, what makes a sure bet? Well, it depends on your lender's specifications and criteria. You need to build a relationship with them, ask them about their offers, open an account with them, and take time to compare them to other banks. To convince your lender to approve your loan, you may need to do the following: 

• Decide What You Want To Invest In

Commercial real estate lenders determine how much to loan you'll get depending on the kind of building, its resale potential, age, and general condition. If you don't have a definite commercial property, it's difficult for a lender to determine your loan amount.

• Keep Your Finances In Order

Banks like to see a proven record of profits. They also need to know whether you're in a position to repay the loan by looking at your credit score. To get financing, you need a good credit score. But if yours is low, consider looking for a partner with financial muscles that can enable you secure financing. 

• Explain How You'll Use The Loan

To get a loan, you must make an elaborate plan on how you will spend the loan. Lenders tend to shy off from spur-of-the-moment, poorly thought-out proposals. They need to see a solid plan. For example, you should determine your total expenditure, total square feet, and the desired location of your property.

• Get Your Documents Ready

Once you know what you want to invest in and pass the credit score test, you'll need to prepare your documents. The documents may include details of the commercial property, an elaborate business plan, and updated financial statements. Proving that you have a competent administrative team can be an added advantage.

For your own sake, it's also essential to understand your bank's loan terms, such as; the loan-to-value ratio, amortization period, and the bank's flexibility in case of unexpected delays in repayment. Doing this will help you determine which lender will suffice and understand your needs.

Conclusion

Getting your commercial real estate loan approved isn’t a guarantee. If you decide to apply, get to know your lender's approval requirements since it will help you understand how to convince them. Don't just get into a bank or call your lender's salesperson without prior planning. Coming up with a solid proposal, keeping your financial records in check, and getting advice from a qualified mortgage broker can increase your chances of getting the loan. Remember, getting your loan depends on how you convince your lender that your proposal is a ‘good gamble.’