Control. It’s something small business owners value, and often the very reason they launched their own enterprise in the first place. But business owners who want to purchase commercial real estate or refinance their existing mortgage can easily feel that sense of control dissipate as they search for a solution that meets their specific needs.
Still, there are steps business owners can take to reclaim that sense of control during the transaction process. The following three tips can help reduce the helplessness prospective borrowers may feel when applying for a commercial mortgage.
- Commit to gaining foundational knowledge before engaging with lenders
Business owners who take some time to educate themselves on both the breadth of loans available and the lender types in today’s market will better position themselves for success. Much of this information can be found online, though business owners can also ask colleagues and the lenders themselves to learn more.
Prospective borrowers can start by researching the different types of commercial loans available. The key here is to learn not only how these loans are structured, but also who can qualify for each one.
For instance, owners of non-profit organizations should know that they are ineligible for an SBA loan before they spend time searching for the ideal SBA lender.
Business owners should also gain a clear understanding of the lender spectrum in today’s market. They may already know that banks and hard money lenders offer the lowest and highest rates, respectively. But many different types of lenders exist between the two extremes, and it can benefit those who face bank rejection to know that they do have other options. Depending on their creditworthiness, prospective borrowers who have done their homework can secure a business-friendly loan – even if they have been denied by their local bank.
- Create a long-term strategy
Perhaps the biggest key to maintaining a sense of comfort and control during the hunt for a commercial mortgage solution is the creation of a long-term strategy. With a plan in place, business owners can work with lenders to craft a financing solution geared to meet a specific set of goals.
This strategy should answer a few important questions. For example, business owners looking to purchase the property they are currently leasing should ask themselves how long they want to own the property. If they see the property as a long-term investment, then they can look for a solution with a longer term and minimal monthly payments.
Prospective borrowers should also analyze the current state of their business when crafting their loan strategy. If cash-flow is strong, it may make sense to buy down the interest rate on the outset of the loan’s term. On the other hand, a struggling business owner may not wish to pay a larger amount up front.
Even the best strategy can change over time as a business evolves and priorities change. But having a plan in place can help a business owner feel more confident as they secure commercial mortgage financing.
- Partner with a lender that gives borrowers the control
Business owners who value control may struggle to work with traditional lenders. While these institutions may offer the lowest rates, their loan programs typically provide little in the way of flexibility. As a result, banks and other traditional lenders are often unable to help prospective borrowers with specific needs.
Fortunately, more flexible alternatives are emerging in the market today. In exchange for a slightly higher interest rate, borrowers can secure a loan that helps their business grow. This is when some knowledge of the lender spectrum can pay dividends.
Consider the medical professional who is struggling to refinance because they have owned their office property for less than a year. Or think of the restaurant owner who wants to take a significant amount of cash out of their existing mortgage to purchase new kitchen appliances. Both cases require a loosening of the restrictions set in place by traditional lenders.
It is important for business owners seeking more freedom and flexibility to understand that alternative solutions do exist – they just need to know where to look.
Business owners who have grown accustomed to being in control are naturally going to expect that power in other areas of their lives as well. With some education and planning, they can feel much more confident as they work to purchase a new commercial property or refinance an existing mortgage.
Leslie Smith is Managing Director of Commercial Direct. She led the launch of Silver Hill Funding in 2016, and is building on that experience to spearhead the launch of the consumer-facing direct lender, Commercial Direct.
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