Ask a local small business owner about their biggest aspirations and you’ll hear a common refrain: they want to own the commercial property they are currently leasing.  To be sure, property ownership has its perks, including additional tax benefits and the ability to build equity over time instead of simply delivering a check to a landlord each month.

Then there are the more long-term benefits, such as the opportunity to rent out a portion of the property to other tenants and the freedom to sell their property when they retire.

So what prevents more small business owners from realizing their ownership dream?  All too often, it’s the prospect of obtaining the commercial mortgage loan.  The fear of rejection or the expectation of a drawn-out, overly complicated transaction process keeps many credit-worthy professionals from even attempting to secure financing.

But if a business owner considers property ownership to be an important aspect of their long-term strategy, they must learn to overcome these challenges.  Here are a few of the most common commercial mortgage hurdles, as well as tactics business owners can use to conquer them.

1. Overcoming property predicaments:

The type of property involved in a commercial mortgage transaction is a crucial aspect in the approval decision-making process for a lender, and one where many are less than flexible.  For example, if underwriters see that the property is located in an overly rural area or can only be used for a single use (such as a church or gas station), they may not feel comfortable approving the loan – regardless of the borrower’s credit-worthiness.

By reviewing various lenders’ guidelines before applying, business owners can get a quick sense of the general lending appetite and focus their energies on lenders who allow or even specialize in their property type.

2. Overcoming cash-flow concerns:

While a residential lender is primarily interested in a borrower’s ability to repay a loan, commercial lenders also focus on the commercial property’s ability to generate cash-flow.  As a result, business owners are expected to prove that the income their business generates can support the debt incurred by the loan.  Lenders also want to make sure the business has sufficient cash-flow to cover unforeseen expenses, such as those needed to repair property damage.

The best course of action for a prospective borrower is to provide a lender with an up-to-date operating statement, rent roll, and a clear explanation for any red flags.  An example here would be a cash-flow analysis that is skewed due to a number of one-time payments the business owner needed to make during the previous year.  This information gives the lender more time to see the big picture and, depending on the lender’s flexibility, possibly make exceptions.

3. Overcoming credit crises:

Many business owners who have experienced a bankruptcy or simply possess a less-than-stellar credit rating believe they will never be able to secure a commercial mortgage loan.  But this simply isn’t the case.

Today’s mortgage industry is populated by a wide range of commercial lenders, from traditional banks to life insurance companies, hard money lenders, and other alternative lending options.  The key is to understand that a commercial lender’s credit policy is defined not only by a credit score range but also by their willingness to listen to a prospective borrower’s story.

While alternative lenders typically charge slightly higher interest rates than banks, they are often more willing to work to understand why a business owner’s credit score is lower than it could be, and possibly overlook a blemish if the reasoning for its existence makes sense.  Therefore, business owners with credit concerns should prepare a detailed explanation for each issue and shift their focus to alternative lending solutions.

4. Overcoming documentation dilemmas:

The simple truth is that commercial mortgage transactions involve a significantly higher amount of paperwork than their residential counterparts.

Take tax returns for instance.  Some borrowers are fearful of producing this documentation because their previous year’s tax returns do not show how successful their business currently is.  Others are self-employed and simply unable to produce them in the first place.

Fortunately, solutions do exist for borrowers with these concerns.  If a business owner is comfortable paying a higher interest rate, they can partner with a lender that offers reduced documentation loans.  These programs use proprietary algorithms or alternative documentation, such as consecutive business bank statements, to prove income in lieu of tax returns.

Many borrowers are more than willing to pay a higher monthly interest rate if it means they can get the financing request approved without having to provide the amount of documentation banks require.

Business owners need not simply dream of owning their own commercial property.  They can make it happen by understanding the common pitfalls that exist along the way and conquering them with the right lender’s help.

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.