Getting ready to purchase your first commercial property is a big step — and often, it’s scary! Whether you’re looking to expand your business or improve your cash flow, getting a commercial mortgage is different from a residential mortgage, and you’ll likely need some assistance.
That’s where we’re here to help. At Penn Street Mortgage, we get it. We know the ins and outs of the commercial mortgage process and are here to offer personalized commercial mortgage services in PA. Our goal is to make this big financial purchase attainable, stress-free, and exciting for first-time commercial buyers.
Let’s walk through the process of getting a commercial real estate loan and how you can make your dream a reality.
Understanding the Needs of First-Time Commercial Buyers in Downingtown, PA
Unlike residential properties, commercial real estate involves complex transactions and significant financial commitments. As a first-time buyer, you’ll likely want to understand zoning laws, property valuations, and what your potential income can be based on the commercial property you’re interested in.
At Penn Street Mortgage, we know the importance of giving each buyer personalized recommendations to help them make the right choice. First-time buyers usually aren’t aware of all the documentation required, how to dissect the different interest rates and the financial implications of different loan terms.
As a trusted Downingtown, PA, mortgage broker, our goal is to answer all your questions and make sure you’re informed about all the different variables that come into play when purchasing a commercial building.
Finding a mortgage broker who understands these specific needs is a big part of your success. At Penn Street Mortgage, we take a client-centric approach, providing support that goes beyond just securing a loan.
The Process from Application to Closing
The process of securing a commercial mortgage can be a bit complicated. But with Penn Street Mortgage, we’ll make sure every step is clear and transparent. We guide our clients from the initial application through to the closing of their commercial property.
Here’s what you can expect when you prepare to apply for a commercial real estate loan.
Initial Consultation
When you come to Penn Street Mortgage, we’ll start with an initial consultation where we’ll sit down to understand your long-term and short-term business goals to understand what you’re looking to achieve. This will make sure we find the best type of loan option and prepare a personalized plan for the application process.
Application Support
When you find the perfect building, it’s time to formally submit an application. We’ll help you prepare the loan application by outlining and organizing necessary documentation, such as financial statements, tax returns, and business plans. We’ll make sure your application is fully ready to go and meticulously put together to give you the best chances of loan approval.
Loan Approval and Closing
Once your application is submitted, we’ll work closely with the lenders on your behalf to negotiate terms and secure approval. When your loan gets approved, we’ll help streamline the closing process and coordinate with all parties to give you a smooth and fast closing experience.
What’s Needed to Qualify for a Commercial Loan
Qualifying for a commercial loan is a completely different process than qualifying for a residential mortgage. Commercial mortgage lenders will use a set of eligibility requirements like:
Creditworthiness
Lenders will evaluate your personal and business credit scores to determine if your credit score qualifies for a loan. A higher credit score can show that there’s a lower risk to the lender, which can improve your chances of getting approved for a loan and securing the most favorable terms.
Financial Statements
A commercial mortgage lender will typically require you to submit balance sheets, profit and loss statements, and cash flow statements to show a full picture of your business’s financial health. They’ll want to make sure you have enough cash flow and stable finances to pay the loan back.
Business Plan
It’s usually required to have a well-thought-out business plan that includes your goals, expected income, and research about the market. This plan should show how your business can grow and make money, which will make banks more confident in lending you money.
Down Payment
When getting a commercial mortgage, you’ll need to have a substantial down payment ranging from 20% to 30% of the property’s purchase price. This shows a lender that you’re committed to the property and can help reduce their overall risk.
Income Verification
To make sure you have the income and profits you say you do, you’ll have to verify your income with personal and business income tax returns, as well as other documentation to verify income. This confirms you have a reliable income stream to cover your loan payments.
Debt-Service Coverage Ratio (DSCR)
The DSCR is an important metric that lenders will use to evaluate your ability to pay back the debt on a commercial mortgage. It takes into account how much cash flow and expenses you have and compares them to the amount of the loan. A DSCR of 1.25 or higher is generally preferred, indicating that your net operating income is at least 25% higher than your debt obligations.
Experience and Management
It can be helpful to emphasize any previous experience in managing commercial properties or related business operations to show a lender you have a proven track record of success. This can strengthen your application and instill trust that you’re a qualified candidate.
Secure Commerical Real Estate with Penn Street Mortgage
Choosing Penn Street Mortgage means partnering with a team committed to your success. Our personalized services and local expertise in Chester County and surrounding areas set us apart. When you work with our team, you’re a partner for life!
If you’re ready to take the next step in your commercial property investment, reach out to us today. Discover how Penn Street Mortgage can help you secure the perfect loan for your business.