Commercial real estate loans are an essential tool in helping to grow businesses, expand reach, or develop property. At their heart, these loans are all about return on investment. It may seem obvious, but investors often make careless mistakes which harm their overall profitability. While lenders are ready and willing to lend you the money you need, it’s vital you avoid falling into some of the most common loan traps. Here’s our helpful guide to avoiding these four common commercial real estate loan mistakes.
No Clear Goal for Your Property
Commercial lenders are much more likely to approve a loan if you can show them exactly how you intend to use the money. Making sure you have a clear idea of your goal(s) for the property gives the lender confidence your plans for the money are well thought out. If you intend to rent or sell the property, be able to illustrate what return you expect on your investment – and in what timeframe. Is this a long-term project or a short-term one? Have you researched the local market to see if your plans are viable? Ignoring basic research like this is a hard money loan mistake easily avoided with the proper due diligence beforehand.
Not Researching Your Lending Options
It certainly pays to do as much research as possible to find the perfect loan for your situation. Many lenders may offer similar loan rates and terms, but it is crucial that you seek out as many options as possible – so you know you are getting the right loan for your project.
It’s also important to avoid revisiting only the same lenders you continuously use. While building a rapport with financiers isn’t a bad thing, it’s crucial to realize that products offered can constantly change – meaning that your go-to lender may not be the right choice for a particular project.
Don’t Dwell on Just Interest Rates
Another common commercial real estate loan mistake is simply focusing on interest rates when choosing a lender. While low rates are great, amortization is also important. Amortization is the length of time over which the loan will be retired. A $500,000 mortgage, for example, with a 10-year balloon payment and a 15-year amortization at 5.5 percent equates to a monthly payment of $4,085. The same mortgage with a 25-year amortization at 6 percent amounts to a payment of $3,221 per month. So – make sure the loan offered works efficiently in your specific situation.
Ignoring Your Balance Sheet
It may seem like common sense, but far too many businesses fail to keep track of their balance sheet – leading to cash flow problems during projects. Make sure that you can pay off your commercial loan while still maintaining enough funds to run your business correctly.
Once you’ve done your research, so you avoid these commercial loan mistakes, contact Lionshare Lending to see some of the excellent financing options we have to offer. We understand that every business’ situation is different – at Lionshare, you aren’t just a number. Our knowledgeable team of seasoned loan experts will work with you every step of the way, to ensure you get the financing you need FAST. Our principals have built a sterling reputation through four decades of continued customer service excellence – so isn’t it time you tried Lionshare? Give us a call today at 1 (855) 505-LEND.