So, you are looking for a business loan to purchase an office or any other commercial property. Getting a business loan should be an easy thing, right? After all, isn’t what lending institutions want to do— lend you money? However, the journey is not so smooth. There are some things that you have to consider if you want to make the entire process hassle-free.
Here are some useful tips that will make the entire process less painful and help you crack the best deal.
1.Have a Well-Defined Budget
It is essential to decide the loan amount that you are interested in applying for. Quite often, borrow more than what is required. In such cases, they can face issues in repaying it. To ensure that such things don’t happen, create a well-defined budget and stay away from exceeding the limit. Avail of the loan based on the financial position of your business.
2. Check the Builder’s Category
Lending institutions are cautious about the builder’s profile, especially if the property is under construction. Lenders would look into the past delivery-schedule maintained by the builder to decide that whether they should sanction the loan for this project or not. So, make sure that you choose a reputable builder with an excellent track record.
3. Check the Residual Age of The Property
Usually, lenders do not extend business loans to ancient properties due to the risks associated with the building’s age and due to lack of a proper sanction plan, fire exits, or other things that a lender may have made compulsory in its new policy. Even if it is a very famous commercial building that houses large corporates, it may not receive funds if it is an ancient building. So, it is essential to have a quick check with your lender.
4. Make Sure the Builder Has Obtained All Statutory Approvals
Before sanctioning the loan, the lender would ensure that the commercial property you intend to buy has all the clearances such as approved plans, clearances from all the related government departments, etc. In case any discrepancy is found, the lender can withhold your loan application.
5. Check the Eligibility Criteria and Necessary Documentation
Every lender has its own eligibility criteria, which applicants have to meet to get the loan. So, make sure your business complies with the loan eligibility criteria of the lender. To get the loan, you would have to duly fill your business application form and submit it along with other documents like bank statements, profit & loss statements, proof of the business’s existence, etc.
6. Be Wary of Risks Which Lenders Assess
Both private and public lending institutions evaluate business loan applications on a myriad of factors. If a business is considered a ‘risky borrower,’ the chances are high that the loan application may be rejected. Therefore, it is essential to compute your risk profile before approaching the lender.
Here are traits that can make any business a risky entity:
- Poor credit score or defaults in payment of past loans
- Poor revenue
- New in the business
- Weak accounting system
- Questionable top-management
7. Leverage Your Personal Credit History
Therefore, before approaching the lender for a business loan, repay your outstanding loans and credit card bill as much as you can afford. A good personal credit score instills some faith in the lender and assures them that you are not saddled under a pile of unpaid debts.
8. Explore Your Options
Most people resort to the traditional loan method and, therefore, prefer to go to banks only. However, there are various non-banking financial institutions as well, which offer business loans with flexible features to meet your varied business needs. It is essential to thoroughly inspect every loan option available in the market before choosing the one. However, don’t make the final choice only based on the interest rate.
Remember, some lenders may offer a low-interest rate but may levy a high fee on other fronts like processing charges, prepayment fees, and others. Therefore, be prudent while choosing one loan option over another.
Your chances of getting a business loan for buying commercial property are more when you have all the important documents in place. Quick anticipation of the lender’s needs would simplify your loan application process and help you get the business loan for buying commercial property.