Your home business has turned out to be a lucrative venture. In fact, you need more space than your basement or spare room can provide. Now is the time to find a small commercial property and take your company to the business district. As you consider your options, choose the financing wisely. Put these tips to good use and your commercial mortgage by CloverMortgage will be just what you need.
Take a Good Look at Your Credit Scores
Assuming your business has been around long enough to establish a credit history, you can bet that lenders will want to look closely at what the current business credit score happens to be. Some may also want information about your personal credit score since you are the business owner. Before submitting an application, do check all of your scores. Doing so will ensure you can answer any questions that the lenders may ask after reviewing the credit reports.
Look in the Right Parts of Town
There are a number of factors that go into choosing the right commercial property. Location is one of them. Ideally, you want to focus on areas that are predicted to continue appreciating in value. That can be an older business district located near residential areas that are currently enjoying an upswing in value. As the property values in the area continue to improve, the commercial property that you buy now could be worth quite a bit more in a few years.
If you’re not sure where to look for an ideal property, take the time to review Canada’s housing market predictions and identify up and coming residential areas located near commercial areas. If the trend for an area is anticipated to last for several years, that’s where you want to invest in a commercial structure.
Consider How Much You Need to Borrow
Don’t expect lenders to cover the entire purchase price of the commercial property. Most will extend loans anywhere between 55% and 80% of the current market value. That means you will need your own cash for the deposit.
Keep in mind that they type of commercial property does make a difference. For example, you are likely to get a loan for a larger percentage of the purchase price if you’re buying an office building versus a farming establishment.
Pay Down Current Debt
Along with your credit scores, do expect lenders to be interested in the difference between what you owe and how much revenue the business takes in on a monthly basis. This is sometimes referred to in the banking industry as the debt service coverage ratio. Essentially, the lender wants to ensure there’s enough cash left over after you pay on current debts to make the mortgage payment.
If possible, pay off some of your current debts before applying. The positive comments left on your credit reports will help your cause. It also frees up more of your collected revenue and makes it easier to prove that you do have the resources to manage the mortgage payments efficiently.
Plan your next move carefully. Doing so will make it easier to finance the purchase of the commercial property and position your business for future growth.
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