Does your company need to purchase property for a new facility or project? Are you wondering how you will finance the transaction? Getting the best financing terms can make a huge impact in your business's future profitability. Lower rates and extended repayment terms can improve your cash flow and ultimately make the project more profitable. Of course, getting the best deal may not be easy. Lenders sometimes look at commercial mortgages with more scrutiny than they would at residential deals. However, if you have good credit and the deal makes sense, you should be able to find a lender. Here are three different routes you may want to explore:
Traditional banks. Your bank will likely be your first point of contact. However, you shouldn't just talk to your normal bank. Banks want business loans because the loans provide the bank with a consistent source of interest income. If you have strong credit and meet with several banks, you may find that they will compete with each other on terms to land your business.
However, traditional bank loans usually requires a steep down payment. They also may not be interested in working with you if you have less-than-perfect credit. However, a bank is a good place to start to see how attractive the terms are.
SBA financing. This type of financing still goes through a bank, but the loan is offered with the backing of the Small Business Administration. There are likely banks in your area that are designated as SBA-lender banks. You can talk to them about an SBA loan and see how that changes the terms. Since the SBA is, in effect, backing you up, you may be able to put less money down or even get approved with subpar credit.
However, keep in mind that these deals can often take a long time to approve. You have to wait for both the bank and the SBA to review your financials and property details. That could take weeks. If you're in a competitive bidding situation on a property, you may not get SBA approval in time to make the deal.
Private lenders. There are plenty of people and organizations out there who want to lend money to companies in order to get the interest income. Insurance companies and pension funds, in particular, often lend money to commercial real estate projects. They also may be more flexible on down payment and other terms and more willing to overlook shaky credit.
Of course, private lenders aren't as common and obvious as a bank. You can't just walk in and ask for a loan. You'll likely need to work with a third-party mortgage broker or financing consultant. They'll have private lender contacts they can reach out to. In some cases, they may bundle together loans from a few different lenders to finance your project.
For more information, consider contacting a company specializing in commercial real estate, such as NAI Norris Beggs & Simpson, for advice on how to get the best deal.