Many of you are turning your commercial real estate investment into a proven alternative to other investment vehicles.
If you are ready to purchase a commercial property and want to know how to target a commercial real estate loan from a bank, then you are at the right place. A commercial property loan is a loan taken against a commercial property to fund big-ticket financial needs.
Therefore, these loans are well-structured among lenders and borrowers due to their flexibility and availability.
In this article, we will emphasize simple steps that will help you avail yourself of a commercial property loan.
What Is A Commercial Property Loan?
A commercial real estate loan is a mortgage you would obtain from a lender to purchase classified as commercial real estate. Therefore, this serves as the collateral for the loan.
Similarly, the major types of commercial real estate include:
Office building.
Industrial purpose.
Multi-family purpose.
Mixed-use.
Retail.
So, if you need a mortgage to purchase or refinance a residential property, you will require a residential loan instead.
Eligibility For Commercial Property Loan
The qualifying norms vary from leader to leader. However, there are a few eligibility requirements that are common to every leader.
Here is a list of requirements to be eligible for loan sanction.
Self-employed individuals are eligible for this loan.
Must be between the age of 24-70.
The loan is available for the citizens residing in India.
Applicant must possess a steady source of functional business or a stable source of income.
Borrower must have the necessity CIBIL score as per the lender requirements.
The property must be free from any legal complexities.
Steps To Get A Commercial Property Loan
Below are the steps you need to follow to avail yourself of a commercial property loan.
1. Find the Best Loan Program
At times, the beginning of the process is challenging to step in.
Diving headfirst without careful consideration could result in you spending precious time contacting lenders who are not willing to take on the risk associated with your specific situation.
Therefore, the world of commercial real estate financing is intricate, making it essential to understand the areas where your scenario might need more strength right from the beginning.
However, a guide to commercial property loans by RHB can prevent potential setbacks and guide you toward the best possible route to securing financing.
2. Submit Loan Application
Once you have examined a lender, the next step is to place all your initial loan application packages. This might comprise some of the following items:
The loan application form.
Authorized to pull your credit. Sometimes, some lenders are willing to go based on your estimated credit score at this point instead of pulling your credit.
Prepare the list of documents for the property.
Create a list of documents regarding the borrowing entity. This will include the article of incorporation, business tax returns, bylaws identifying the business owners, and operating agreements.
Documents regarding the guarantor. This comprises a personal financial statement, government-issued photo identification, and bank statement.
3. Obtain Letter Of Intent
The LOI or Letter Of Intent is a non-binding document that outlines the proposed terms. It includes:
Loan term.
Subject property address.
Amortization.
Loan amount and LTV.
Any prepayment penalties.
Confirmation that it is owner-occupied.
Confirmation that this is a purchase transaction.
A preliminary estimation of the closing cost, monthly payments, and origination fees.
4. Submit Documents
After you get the sign on the LOI, the lender will officially open your loan and assign the number.
At the same time, you will also get approval on the information and documents that must be offered to clear out the lender’s condition.
Thus, the lender will order third-party reports:
Background check.
Credit report.
Environmental report.
Appraisal.
Title.
5. Wait For Final Approval
Once all the conditions are cleared and everything returns to the lender’s satisfaction, the lender will issue a financial approval letter.
So, unlike the LOI, the final approval letter is binding as you have successfully cleared all the hurdles in the approval process.
Summing Up
A commercial property loan allows you to borrow a large amount of capital that helps you meet your medium—and long-term needs.
So, if you own commercial properties, you can use them as collateral and borrow the required funds if they fulfill the lender’s eligibility requirements.
Besides, before you can borrow, ensure that you check every aspect of the loan to better equip yourself to handle the loan process more efficiently.