Applying for a loan for real estate development is not easy and requires a lot of documentation. Although most lenders have clear eligibility criteria, you must gather all the required documents, create a business plan, and make sure you are doing everything correctly. There are many cases when entrepreneurs need to learn how to apply for a loan and get rejected. Unfortunately, they get rejected for making basic mistakes. Here’s what to avoid when asking for a loan for real estate development:
Don’t Apply If You Have a Poor Business Plan
Having a clear business plan is critical when applying for a commercial real estate loan. The lender has to understand how your new project is going to be profitable. You’ll have to show how you plan to grow the business over the next few years and how your revenue and profit will grow. Also, you will have to include a detailed market analysis, marketing strategies, and other data that shows your project is viable.
Not having a clear, comprehensive business plan will give the impression that you do not have the vision to make the project profitable. Even worse, it shows that you won’t be able to pay back the loan, which is the most crucial aspect for any lender.
Your Documentation Is Insufficient
Your application will have to include a variety of related business documents, like financial documents, address and income proof, establishment details, tax returns, and so on. Make sure to keep these documents ready so you can add them to your application when needed. If you fail to provide the right documents, you will give the impression that you are either not very professional or trying to hide something. This will likely delay the entire process for weeks or even months.
Unfortunately, some entrepreneurs try to provide manipulated financial documents when applying for a loan for real estate development. This is very serious and will get you rejected immediately. Lenders will never approve loans to borrowers that are willing to manipulate their financial documents. What’s more, your chances of getting another loan in the future will diminish. Keep in mind that all businesses go through difficult times, but using false financial documents is unacceptable.
Not Doing Enough Research
A variety of lenders offers commercial real estate loans. You should research each type of lender and decide which is better for your new project. Compare interest rates, processing fees, the flexibility of the loan terms, the maximum loan amount, the special requirements, ease of application, but also their customer service and reviews. Take your time and make sure you check every detail before applying for the loan.
Having A Bad Credit Score
Your credit score is hugely important when applying for a commercial real estate loan. The credit score shows your creditworthiness, and lenders love it. Higher credit scores indicate that you can repay your loans and are less risky.
You created a good business plan and look forward to starting your project. Now, you need the right type of funding to get your project moving. Here at Urban Bay Financial, we offer the most attractive commercial real estate loans for developers! Contact us here!