Getting Approved For A CRE Loan
The benefit of a commercial real estate loan is that it provides capital to help you acquire real estate property that will provide steady income for your business. Getting a CRE loan, however, requires a lender to have important financial documents on you and your business before they can approve you. Although you will run into different requirements depending on your lender, your loan application will consist of at least a few important documents.
First, lenders will want personal tax returns and financial statements from the previous two years from any owner or partner of the business. These documents list your assets and liabilities. Having a healthy amount of assets and little to no liabilities will go a long way to convincing a lender that you’re not a risky bet. Also, business financial statements and tax returns will provide similar information for the business. These inform your lender how solvent your business is, whether it has a good cash flow, and if it has any outstanding liabilities. A business with poor income and tax problems is unlikely to pay off a CRE loan, so make sure your books are in good order.
You should also get a resume ready to show your lender. A resume is like your personal representative because it tells your lender about your business experience and skills. If you have commercial real estate experience or any relevant business experience, be sure it is noticeable in your resume. Do the same for your management team. Your lender is looking for a competent and skilled staff that can run the property well. For example, if you should be planning to buy a restaurant, emphasize your staff’s qualifications in that industry.
A lender may also require you to provide a projection of your income and expenses, which is called a real estate pro forma. This document may include projections of leasing commissions, lease renewals, or improvements to your property. Furthermore, if you are allowing individuals or businesses to rent on your property, you may also need to provide rent rolls. These show information about tenants that rent on your property, including how much is paid and when their lease will expire.
Financial lenders want to know that you are a skilled and capable businessperson that’s on solid fiscal footing and have hired a good team that can run a successful business, so if the time arrives to apply for a CRE loan, make sure that your paperwork speaks well of you and your staff, and soon you’ll be enjoying the benefits of your new real estate property.