Common Mistakes to Avoid When Applying for a Commercial Loan

It's a fact: investors seeking commercial mortgage financing are not always successful. Sometimes, investors are simply unable to secure a loan. Other times, borrowers end up burdened by a solution that does not truly meet their needs. The good news is that you can learn from the errors others make. Here are some of the most common mistakes and smart tips for avoiding them as you apply for your commercial loan.

Mistake #1: Limit Yourself to Traditional Commercial Financing Options

One of the biggest mistakes people make when searching for a commercial mortgage is not shopping around for the right lender. Lenders will offer different perks, such as better interest rates, lower fees, a wider range of loan products, fewer restrictions, and more personalized services. For instance, a bank might offer a lower rate than other types of lenders, but they also require a greater amount of documentation.  On the other hand, a non-bank alternative lender’s slightly higher rate may be offset by their ability to close a loan very quickly. The important thing to remember is to shop around: talk to many different lenders to see who will put forth the best overall offer.

Mistake #2: Submit an Incomplete Application

First and foremost, lenders want to make sure they're taking a safe risk, and that means cross-referencing your application with as much background information as possible. No matter what lender you choose, therefore, the more documentation you can provide, the higher the chances that your loan will be approved, and the more likely you'll get a better rate and better terms. Here are some of the documents that are typically required with a commercial loan application:

  • Tax returns

  • Budget

  • Personal bank statements

  • Business operating statements

  • Business plan

  • Balance sheet

  • Proposed repayment strategy

Mistake #3: Accept a standard set of terms

If you partner with a lender that values flexibility, you can choose options and terms that best meet your particular set of needs. Certain aspects of a commercial loan, like the prepayment fee, interest-only period, and even the payment day can be adjusted so that you end up with a more personalized finance solution

Whether you choose to adjust the loan term, buy down the interest rate, or the fixed rate period, be sure to consider your long-term goals and the effect each adjust may have on them. Most importantly – remember that you do not need to settle for an inflexible lending solution. If traditional lenders are not giving you enough options, it may be time to consider a non-bank alternative.

When you hunt for the right lender, come prepared, and identify your specific set of needs, you stand a much higher chance of getting the mortgage and terms you want. Contact us today to get your application rolling our commercial mortgage experts.