How to Get Commercial Real Estate Loans for Your Property Investments

How to Get Commercial Real Estate Loans for Your Property Investments

Getting approved for commercial real estate loans can be more challenging than other types of business funding. Real estate has suffered major losses within the last decade, and some types of lenders have disappeared from the menu of choices due to bad business deals. The good news is that it is still possible to fund your property buying, as long as you have a solid plan of action. You also need to carefully research your potential real estate leads to make sure you are on the right path. The economic climate in today’s commercial property world leaves not much room for error when picking investments. When it’s time to apply for a loan, it’s important to know about the down payment realities, credit score requirements and the right sources of funding for your real estate dreams.

Down Payment Realities

While in the past it may have been possible to secure an investment property loan with little or no down payment, that era is now over. Today, lenders are less willing to fund commercial property purchases if the entrepreneur is lacking a down payment. Because commercial buildings are often much more costly than a residential home, you may be looking at a sizeable piece of capital that needs to be raised before you go out seeking a loan. Your options may include taking the time to save up for your necessary down payment, or finding another loan product so that you can borrow the essential funds.

Credit Score Requirements

Lenders for commercial real estate loans today have increased the credit score requirements so that only the most promising buyers get approval. They have tried to reduce the risk of financing buyers who have had real estate financial problems from the past. That doesn’t mean that your credit score needs to be perfect. You just need to make sure that you don’t have any major blemishes on your credit score such as bankruptcies, judgments or foreclosures. If you’ve had problems in the past, the general wait time for derogatory marks to fall off of your file is seven years.

Sources of Funding

The contemporary market for commercial real estate loans has developers looking at many different sources of funding to get the necessary capital for their projects. This market, which used to be dominated by banks, is now opening up to other types of lenders including private individuals, venture capital groups and other alternative funding opportunities.

Property developers working toward the right commercial real estate loans have a greater task ahead of them today because of industry conditions. Savvy investors spend time growing their down payment and increasing their credit score to get the best loan possible.