Commercial Lending Today

Commercial lending in today’s market is much different than it was a few years ago.   Borrower must prepare for a tougher environment.  There are a few simple things that borrowers can do that will increase their chance of success when seeking a commercial loan.

Keep it simple!  The days of complex corporate structures are gone.  If the loan you are seeking is less than $2,000,000 then you should consider closing as a single entity borrower.

Real property makes it real.  If you want to get the best rates, the easiest qualifying ratios and the most flexible terms, add something real, preferably real estate.  Real property gives the lender a tangible asset that they can leverage and looks better on their books.

Cash is King!  And when we say cash is king we mean that in many ways.  Banks want to know that your business is cash flow positive and that you have some reserves stashed away just in case something goes awry.

SBA may be the way.  That’s right, the SBA has been getting a lot of press lately and that’s for good reason.  SBA 7(a) and SBA 504 programs have been expanded and are fully funded.  The government sees these loans as a way to energize small business and the economy.  While difficult to do because of the tiresome government regulations, SBA is a very real and viable option for many types of commercial loan needs.

The main thing one needs to remember about today’s lending environment is that the banks don’t mind taking risks; they just want to be compensated appropriately for the risk they are taking.  So if you need a high LTV you might have to sacrifice a little on the interest rates.