Borrower Beware: Pitfalls To Avoid With Your Commercial Real Estate Loan

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Borrower Beware: Pitfalls To Avoid With Your Commercial Real Estate Loan

iStock_000001084155XSmallApplying for a commercial real estate loan can be nerve-wracking under the best of circumstances, but many business owners make matters even worse by fumbling through the process. Learn from those that have made mistakes so you don’t have to make them yourself.

Even the savviest business people can be prone to making a mistake every now and again. In fact, many business owners will tell you that they frequently make mistakes, but that they do not make the same mistake twice. When it comes to something as momentous as obtaining a commercial real estate loan, even the slightest mistake could cost you in both time and money. How can you avoid making huge mistakes? By learning from the mistakes of others. Here are three pitfalls to be on the lookout for as you move forward with your commercial real estate loan.

Failing to have a solid business plan – This seems like a no brainer, but if you are seeking a loan and have not updated your business plan in a while, you should spend some time doing that before even filling out the application and preparing the rest of the paperwork. Make sure that your new and updated business plan includes the most recent financial figures and operational procedures. It also might be a good idea to include an addendum that addresses how being granted a loan will change the plan.

Having your accounting in order (and keeping it up to date) – Many small business owners simply hand their accounting off to professionals and then never pay attention to it again. While having a professional accountant is a very smart decision, completely ignoring the numbers is not. Many small business owners make the mistake of only noticing financials when something has gone wrong or when it is tax season. However, when considering a loan, it is extremely important to have a thorough understanding of cash flow and balance sheets. It is also important to stay on top of this information throughout the process. So, if you are thinking about expanding your operations with a loan, it is time to dive into the numbers and stay there.

Not shopping around for lenders – It is no secret that applying for commercial real estate loans is time consuming and stressful process, full of mountains of paperwork and endless conversations with lenders. But one mistake that many small business owners make is to settle for the first offer that is given to them. Sure, there is often a tremendous amount of relief because not only did you get the funding that you desired, but you also don’t have to worry about continuing the process. This is a mistake, however. Is the first loan the best deal for you? Are the terms to your liking? What about payment options? If you have no other offers to compare it to, there is no way of knowing if you are getting the best loan for your specific needs. So resist the urge to grab the first offer that comes your way. It might end up being the best one, but there is no way to know unless you have others by which to compare it.

How can I avoid making mistakes of my own when applying for commercial real estate loans?

The best way to be successful in obtaining the best commercial real estate loan for you and avoiding the pitfalls that many have stumbled into is to simply pay attention to detail. Be prepared to put in lots of work gathering documents, reading terms and negotiating. Do not cut corners and ask lots of questions!


Dennis Mortgage Broker ArizonaDennis 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

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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.

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