When it comes to financing your business, it is often a reality that you will need to seek out funding from a variety of sources in order to expand or provide an influx of inventory. Commercial lending is a complex industry that provides small businesses the opportunity to cover costs that they would not be able to cover on their own.

Even if you only need an extra $10,000 to cover an uptick in inventory for the busy season, you will undoubtedly find the need to pursue a commercial loan at some point in your business career. While it might not be comfortable to take on massive amounts of business debt, it is often times simply the way that business works. It is for this purpose that commercial lending exists.

Even though many loans come from non-traditional sources, lenders tend to be fairly conservative in their thought process for whether or not to grant your business the funding that it has requested. Bank statements and taxes are going to top the list of what lenders look through to get a snap shot of your business. This most likely will include personal and business financial information, even if you are not personal liable for a business loan. Lenders are going to be looking for your ability to pay back the loan and will try to determine how high of a credit risk you are.

Commercial lending institutions have a tendency to give businesses that have been operating for at least three years a better chance of obtaining a loan. In their eyes, this is enough time to establish a track record of responsible accounting and financial credibility. If you have been in business for less than three years, all is not lost, as there are lenders that specialize in new businesses, but chances are that you will be dealing with terms or interests rates that are less than desirable compared to those that would be offered if you have been operating for more than three years. Another key element of establishing credibility with a lender is to provide a listing of both accounts payable and accounts receivable.

Another reality of the commercial lending industry is that lenders, whether they be banks or another non-traditional lender, are in the game to make money. That really should come as no surprise. But you can use this to your advantage. If you have the financial chops to handle it, this simple fact can actually help you secure a higher loan. From the standpoint of the bank, there is actually no difference in cost to the bank between a loan that is $10,000 and one that is $1,000,000. Their time and effort is going to be the same regardless of the number on the page. Of course, their risk is going to be higher with the increased amount, but the output for them is the same.

Contrast this with how much they stand to gain in interest with a larger loan and you might be able to negotiate up in value. Again though, this is not recommended if you cannot pay the loan back! If that’s the case, you will be in trouble no matter the size of the loan.

How do I know if pursuing a loan through commercial lending is right for me?

This is a difficult choice. If pursing a loan is going to make your business more viable and competitive, ultimately generating more profit, then it is most likely a good idea. However, make sure that you are financially responsible and able to sustain the loan for the duration.

Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:     (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.