Things to Know When Applying For a Commercial Loan

The market for commercial lending is very large and can be very overwhelming. There are lots of things you should know when applying for a commercial loan and a commercial lender will be able to answer all of your questions in great detail, but it is nice to know what to expect and be ready with the necessary documents before you approach a commercial lender. Here are some questions you may want answered in order to be ready when you apply for a commercial loan:1. What is the purpose of a commercial loan?A commercial loan is basically credit extended to an individual in order to help out their company. The credit can then be used for a range of things, such as expanding your business or as leverage equity in commercial real estate.2. Who is right for commercial lending?Anyone who owns a business or is in the process of starting up a business can apply for a commercial mortgage. But it is important to know that applying for a commercial mortgage is very different than applying for a personal home mortgage. Since commercial loans are not backed by a government entity, most commercial lenders are risk-averse, meaning that those applying for a commercial loan should expect to pay a higher interest rate compared to the rate of a home loan.3. Where and how can you apply for commercial mortgage?Figuring out the type of commercial lender you should work with will depend on the type of loan and the loan amount. For small businesses looking to borrow less than $2,000,000, you will want to contact a direct commercial lender or your local bank. If you work with a local bank, they will be able to work with you on a face-to-face basis to determine the type of loan which is best for your company. However, there are also many non-bank direct commercial lenders that can be found easily on the internet. You may not get the same personal attention from a non-bank commercial lender, but you will have more lenient application terms.4. What will I need in order to apply for a commercial mortgage?Whether you are working with a local bank or a direct commercial lender, you will want to have all your documents in order. You will want to be ready with a clearly written purpose for the loan and an organized breakdown of all your company expenses in order for the lender to be able to determine which loan is best for you. To do this, have all your income statements, profit and loss statements, balance sheets, and statements of cash flow ready when starting the process. You will also want the last two years of both your business and personal tax returns and at least the last two months of paycheck stubs in order to be ready to attach with your application.On top of having all your business documents in order, you may also want to have the information and the necessary documents for what you are using as collateral ready in order to show the commercial lender that you are serious and ready to work with them.You will also want to check your personal credit before applying. This can be done by visiting a free credit report websites such as A next to flawless credit record is ideal for commercial lending. More often than not, a commercial lender will like for your debt to income ratio to be less than 40%. If your credit report shows blemishes, you may want to go directly to a non-bank commercial lender who might be more willing to work with you.5. How long will it take to get a commercial loan?The typical local bank commercial loan goes through numerous phases during the process and you should expect for it to take several weeks before getting a loan commitment. However, online non-bank commercial lenders generally pre-qualify quicker. Ultimately, if you are organized and read by having all your documents in order, the process of applying for a commercial loan will be speedier and less overwhelming.

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