5 Tips to Getting the Best Terms on Your Commercial Mortgage Loan

Looking to secure an investment property loan to help you invest in a commercial real estate property? Locking in the best terms for your loan will naturally be a priority. At the same time, you will have to prove to the lender that this is a "win-win" situation where both of you benefit economically.

So what can you do to ensure that you get the terms you want on your loan?

1. Consider Your Qualifications

The better qualified you are to get a loan, the better your bargaining position is to get the terms that you want. If you're just scraping by with the bare minimum to qualify for commercial financing, then don't expect too much in the way of privileges.

However, if you've been in business for more than three years, have a credit rating over 700, and can put down more than 30% on your down payment, for example, you can expect to see favorable terms when shopping for the best lending partner.

2. Use the Location

Dense, urban centers see more foot traffic than rural locations. If a lender determines that your commercial property is located in a densely populated area full of potential customers or tenants, they will feel more confident about the property’s ability to generate income.

For transactions involving retail, office, or multifamily buildings, this factor can make a big difference in the loan terms offered.

If you’re looking to invest in a commercial property and lock in the best rate and terms possible, it may make sense to focus on those situated in urban or suburban markets.

3. Cash flow Matters

The occupancy and cash flow of a particular property can be another good way to get favorable terms. Commercial mortgage financing is always easier to get, with better terms, when the property in question is already a proven “winner” with a past precedent for generating income. It's another sign that you're making a good investment that will deliver on its financial promise.

4. Provide Sufficient Documentation

Investors who are not able to produce tax return documentation do have options in today’s lending environment. But these prospective borrowers are not able to secure the best possible terms for their finance request.

The truth is that flexibility comes at a price. While the trade-off is certainly worth it for those who have been turned down by banks due to documentation issues, borrowers who are able to meet lender requirements should consider doing so.

That’s because, in a general sense, the more documentation you are able to produce for a lender’s underwriting team, the better chance you have of locking in a low rate and attractive loan terms.

5. Present a Strong Rent Roll (if applicable)

Lenders want to see that a commercial property is fully-tenanted, or as close to it as possible. Any tactic you take to increase the number of tenants in your property, whether it be improvements to the building itself or a new marketing strategy, can promote stability from a lender’s perspective, which could then help you secure more favorable loan terms.

If you're thinking of getting a commercial mortgage loan and you want to obtain good terms, consider all of these factors. If you feel you’re ready, come to us! We can help you apply now for your own commercial loan.