When starting a new business or growing an existing one, many business owners look for ways to get a commercial mortgage so they can buy a place to run their business. In the end, there isn't much difference between a commercial loan and a home mortgage. Before making a decision on a loan application, both look at the business owner's credit score.
Even if the business seems like it could be successful, it won't be able to get a loan if the people who run it don't have a good track record of paying their bills. If the owner has bad credit, it will be harder for them to get a commercial mortgage without going through one of the companies that do lend to people with bad credit.
Even if you have a great credit score, it may be hard to get a commercial mortgage if the business doesn't make sense and doesn't meet the lender's requirements. The institution's job is to only give loans to people who can prove they can and want to pay back the loan on time. The property for which the loan is being asked for also has to meet certain criteria.
If a property is in bad shape, it may not be eligible unless it can be fixed up to a good value for a fair price. Basically, a lender won't lend money on a building that will need to be replaced soon, unless the building itself is worth more than the loan amount. Even in these cases, the lender may still want a plan for when the improvements will be made and proof that the work is on track to be done by the deadline.
Getting a commercial mortgage usually requires more financial information than getting a regular mortgage. This is because information about the business and the person or people who will be responsible for paying back the loan is collected. Information about a business can include the value of any assets, like equipment or accounts receivable, as well as estimates of future income, which can be seen in the form of firm orders for goods or services.
If the business has been around for a while, a history of income and proof that the business has paid its debts on time may be required. Those who want a commercial mortgage to get out of debt may not be able to do so easily. But it might be possible to get a business loan to pay off debt so the business can buy more properties if all the properties can be used as collateral.
With many commercial mortgage agreements, it is not unusual for an amount of 80 percent to be granted to those with good credit, as the lender may consider a 20 percent down payment as a commitment by the buyer to maintain ownership of the property. Having the financial commitment in place is usually a good indication of the new owners willingness and desire to see the loan through to completion.
