Buying a new office space for your business? Or expanding your retail outlet? Make sure to use these five tips to speed up your commercial property loan approval process.
Getting a business loan to buy a new office space or expand your retail outlet should be easy right? After all, isn’t that what lenders do – lend you money? No, in fact, getting your commercial property loan can be quite frustrating, if you aren’t aware of the right ways to go about it.
Worry not, here in this article, you can find the best tips and tricks to get your commercial property loan sanctioned with the minimal wait time. Let’s dig in.
- Get your Documents in Order
Even before you decide to apply for a loan for commercial property, make sure that you get all the required documents in order. Most financial institutions need you to submit copies of your latest tax returns, partnership/proprietorship deeds, recent profit loss statements, leases/sales contracts, bank statements, other asset and liability statements and more.
Make sure that all these documents are up-to-date and in order. Having everything ready shows that you’re committed to the loan process, and helps you present a confident image of yourself to the lender.
- Know your Property Type and Value
Before you approach the lender, make sure that you have identified the exact property you want to buy or construct.
Commercial spaces can be broadly divided into two categories – (1) An office space (2) A retail outlet. These two types can be further divided into two types like (A) Ready-to-Occupy property (B) Under construction property.
Identify the type of property you want to purchase and determine the exact location. Once you have identified your property, the next step is to determine its current value. This will help you in determining the correct loan amount you require.
- Be Ready with Down-payment
When it comes to housing loans, financial institutions provide you with 75-90% of the value of the property. However, the Loan to Value (LTV) ratio is lesser for commercial property loans. In most cases, the amount is restricted to 55% of the property value.
This means that you as a borrower have to contribute the rest of the amount. So, make sure that you prepare the necessary funding beforehand to avoid delays in the loan sanction.
- Draft a Property Strategy
Lenders want to know what you’re going to do with the property and what it means for your business. While applying for your loan, make sure to discuss this strategy with the loan officer. Also, the lender will be keen to know how the property fits into your overall corporate structure.
Having a corporate diagram helps the lender to understand the nature and structure of your business at a glance. Defining the property strategy and presenting your overall corporate structure ensures that the lender understands your business profile at a go and reduces the overall loan approval time.
- Get the Technical Evaluation and Statutory Approvals done beforehand
Your commercial property has to comply with several technical specifications to be approved by the lender. Also, the property has to get approvals and clearance from several departments like the corporation, forest, fire, and so on.
Checking this before the loan approval process and getting it all sorted ensures that everything proceeds smoothly when the technical evaluation team of the lender verifies all these details.
While the commercial property loan approval process is quite lengthy and complicated when compared to home loans, it’s worth it in the long run. Commercial property not only cuts down on rental costs but is an asset that adds to the overall value of your business.