Very few investors have the upfront capital needed to execute commercial real estate deals. Financing is, therefore, an essential component of commercial real estate investing. Unfortunately, many potential borrowers are wary of commercial lending, and thus miss out on opportunities. This trepidation is largely due to the common myths about commercial loans. When approached correctly, business loans can be precisely what you need to achieve your goals. Here are myths about business loans that you shouldn’t let deter you from find financing that’s ideal for you.
You Should Only Consider Big Banks
Big banks can be useful, but there must be a reason why borrowers are increasingly choosing small lenders over the big banks. For instance, borrowers now want lenders that offer more flexibility, fewer restrictions, and less paperwork, which is the opposite of what most big banks offer, according to an article published by Forbes. Borrowers are opting for commercial mortgage lenders who are more accommodating to their needs.
You Need a Perfect Credit Score
This is one of the most prevalent myths about business lending. Sure, having a good credit score helps, but commercial loans are typically taken by business entities and not individuals and lenders use the commercial property as collateral. For instance, at Fidelity Mortgage Lenders, we hinge our financing on the property’s value rather than borrowers’ credit. As a result, even with a not-so-perfect credit history, you can still get financing for a commercial property.
You can Hardly Find Good Deals
According to the Wharton School, fewer people have an in-depth understanding of commercial real estate compared to the residential market. Because of the knowledge gap, most people do not see the immense investment opportunities that abound in the real estate market.
With technology and more accommodating commercial mortgage lenders, finding great deals in the commercial real estate market is now easier than ever. Besides, commercial properties often come with lower risk and more returns than residential properties.
Some of the other popular commercial lending myths that you should ignore include:
- Applying for a business loan is a lengthy process –
This can be true when dealing with some lenders like the big banks. However, with an agile and flexible commercial mortgage lender such as Fidelity Mortgage Lenders, the application process is typically short because you don’t necessarily need to provide your tax returns, and you can get financing in 3 business days.
- With commercial financing, personal assets are always at risk –
One of the biggest fears that investors have when considering commercial loans is that they might lose their personal assets in case the business venture doesn’t work out. To protect your personal assets, you should opt for a lender that doesn’t demand personal guarantees.
- You need an exceedingly large down payment –
Many borrowers have a notion that one needs to put down a huge down payment to secure a mortgage on a commercial property. The reality is that with the right lender, you can negotiate reasonable down payments.
- You need a complex business plan –
Another wrong assumption is that you can’t get financing if you don’t have an elaborate business plan. While it’s true that you may need to be clear on how your business works, a good lender won’t demand a business plan. They’ll instead judge your venture by evaluating it in its entirety.
The common belief that commercial lending is complicated, risky, and largely unattainable is wrong. At Fidelity Mortgage Lenders, we can help you secure the right loan for your needs. To get started, contact us or give us a call at (800) 752-9533.