| Securing commercial real estate financing can | | | | Financiers want to see that the venture will |
| be a difficult task if you're not familiar | | | | allow you to pay the mortgage due each month. |
| with the field. First, let's distinguish | | | | A proposal that does not clearly indicate |
| between residential and commercial. | | | | profits enough to cover expenses and loan |
| Residential properties are solely for housing | | | | payments is not likely to receive funds. It |
| people. The location can have up to four | | | | is important that you investigate this before |
| units. Five or more units, and just about | | | | proposing a venture to a lender. Make sure |
| anything not intended for habitation, | | | | you account for all of the expenses (repairs, |
| qualifies as commercial. | | | | maintenance, etc.) before presenting your net |
| | | | income on the property. |
| With that clear, let's discuss the actual | | | | |
| financing. Acquiring money, and how much you | | | | Consider the laws and demographics of the |
| are allowed to borrow, is affected by a | | | | area because the finance agency will. If laws |
| number of factors. | | | | are going to restrict the productivity of |
| | | | your venture, lenders may be reluctant to |
| When analyzing an investment plan, lenders | | | | provide a loan. The same is true of |
| consider the following: | | | | demographics and the economic climate of the |
| | | | location. If the population is low or isn't |
| * The borrower's credit rating | | | | likely to patronize your business, again, |
| | | | that can effect whether or not you get |
| * The net income of the venture | | | | funding. Also, the economic activity of the |
| | | | area influences financial decisions. If there |
| * The laws and demographics of the area | | | | is a boom, your chances increase. Let's say |
| | | | the area is a money drain, or in an |
| * The kind and number of tenants. | | | | escalating slump. It will be harder to |
| | | | justify commercial real estate financing in |
| These are not the only things lenders | | | | those kinds of conditions. |
| consider, but these can give you an idea of | | | | |
| how much planning and research you need to | | | | Also look at your tenants. For example, if |
| do. We'll address these as the most immediate | | | | you're proposing to open a health food store |
| concerns that you can also investigate on | | | | in a strip property that has several fast |
| your own. | | | | food tenants, then your business's chances of |
| | | | success are much lower. If, for instance, you |
| Commercials all over television talk about a | | | | open the same kind of store in a strip with a |
| person's credit rating. This very important | | | | gym, yoga studio and health spa as tenants, |
| number controls your financing life and | | | | the likelihood of getting frequent customers |
| future. Basically, the higher the rating, the | | | | is increased. Lending institutions take these |
| more likely lenders are to give you a larger | | | | sorts of things into consideration because |
| loan with a decent interest rate. For them, a | | | | they influence the profitability of your |
| good rating indicates not only your ability | | | | venture. |
| to pay, but your level of responsibility to | | | | |
| your debtors. If you have a median rating, | | | | These are not the only considerations, but |
| you may have to begin with a smaller venture | | | | they are easy to check into and can help you |
| so that you can get a reasonable loan and | | | | decide if a particular venture is worth your |
| interest rate. | | | | time and the work involved in securing |
| | | | commercial real estate financing. Make sure |
| In addition to the credit rating, but far | | | | you do your homework first, and securing |
| more important a consideration in commercial | | | | funds for your venture will be an easier |
| property, is the net income of the venture. | | | | process. |