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5 Tips for Getting the Best Commercial Real Estate Loan Rates
Author David Schneider | Nov 16,2007
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As a smart business owner, you know the importance of minimizing the costs that go into your business. One of the largest costs that can eat into your profits is your commercial real estate loan. While a loan is often a necessary business expense, there are numerous steps that you can take to ensure that your loan rates stay low. Here are five tips on how to get the best commercial real estate loan rates for your needs.
Plan Ahead Before Getting Commercial Loan Quotes
It's suggested that you contact several different commercial lenders to see what range of interest rates are available to you. Of course, you want the terms of your loan quotes and associated rates to be an accurate estimate of what you will actually wind up paying. Due to this, it's a good idea to gather all necessary information pertaining to your business prior to requesting loan quotes.
When you contact a commercial lender, they will want to know the details of your business before they can offer you a quote. To do this, they will likely request documents such as your business plan, past two years of tax returns (personal and business), property income information and property expenses. Have all of these available to ensure you receive an accurate loan quote from each lender.
Be Aware of Your Commercial Loan Rate Options
Commercial loans are available with either a fixed interest rate or adjustable interest rate. A fixed interest rate allows you to lock in the current market rate that the lender is offering to you. In contrast, an adjustable-rate business loan fluctuates as market interest rates rise or fall.
Selecting the right loan rate option for you depends on the current market rates. If rates are low, then you'll want a fixed-interest loan that allows you to keep that favorable loan rate for the entire length of your term. If market rates are high, then an adjustable-rate loan will allow you to take advantage of lower interest rates once they fall. To give you a better idea of what is considered a "low" interest rate, historical market rates have typically fluctuated between seven and 18 percent.
Avoid Commercial Loans That Include Prepayment Penalties
Just as with your business, lenders want their business to be as profitable as possible. Many borrowers choose to pay off their loan early because it saves them money in total interest paid. Lenders would prefer you pay over the full course of the loan so that they can reap the full rewards of the interest you owe.
To help cover potential lost profits from paying off a loan early, many business loans include prepayment clauses. These clauses require you to pay a penalty fee for paying off your loan early. If you are interested in doing just that, then you should look for a commercial loan that does not include prepayment penalties.
Use a Commercial Mortgage Broker
Many business owners simply do not have the time to call around and acquire numerous loan quotes. If this is you, or you would simply like to make the process easier on yourself, then you can get a commercial loan broker to do the grunt work for you. A commercial loan broker will query real estate lenders on your behalf to obtain a variety of loan offers. You simply need to provide your pertinent personal and business information to the broker so that he or she can deliver accurate quotes for you to review.
Negotiate Lower Commercial Real Estate Rates
Many commercial lenders are open to negotiations when it comes to finalizing your loan terms. Due to this, it never hurts to ask if there is anything you can do to have your interest rate lowered. Ask the lending company how they determine what rate they apply to each commercial loan. If you have already received a lower rate quote from another lender, tell them and see if they will match or beat it. Finally, if you can't get the commercial lender to lower your interest rate, see if you can reduce rates elsewhere. You may be able to save money on upfront costs such as lenders fees or application fees. As a smart business owner, you know the importance of minimizing the costs that go into your business. One of the largest costs that can eat into your profits is your commercial real estate loan. While a loan is often a necessary business expense, there are numerous steps that you can take to ensure that your loan rates stay low. Here are five tips on how to get the best commercial real estate loan rates for your needs.
Plan Ahead Before Getting Commercial Loan Quotes
It's suggested that you contact several different commercial lenders to see what range of interest rates are available to you. Of course, you want the terms of your loan quotes and associated rates to be an accurate estimate of what you will actually wind up paying. Due to this, it's a good idea to gather all necessary information pertaining to your business prior to requesting loan quotes.
When you contact a commercial lender, they will want to know the details of your business before they can offer you a quote. To do this, they will likely request documents such as your business plan, past two years of tax returns (personal and business), property income information and property expenses. Have all of these available to ensure you receive an accurate loan quote from each lender.
Be Aware of Your Commercial Loan Rate Options
Commercial loans are available with either a fixed interest rate or adjustable interest rate. A fixed interest rate allows you to lock in the current market rate that the lender is offering to you. In contrast, an adjustable-rate business loan fluctuates as market interest rates rise or fall.
Selecting the right loan rate option for you depends on the current market rates. If rates are low, then you'll want a fixed-interest loan that allows you to keep that favorable loan rate for the entire length of your term. If market rates are high, then an adjustable-rate loan will allow you to take advantage of lower interest rates once they fall. To give you a better idea of what is considered a "low" interest rate, historical market rates have typically fluctuated between seven and 18 percent.
Avoid Commercial Loans That Include Prepayment Penalties
Just as with your business, lenders want their business to be as profitable as possible. Many borrowers choose to pay off their loan early because it saves them money in total interest paid. Lenders would prefer you pay over the full course of the loan so that they can reap the full rewards of the interest you owe.
To help cover potential lost profits from paying off a loan early, many business loans include prepayment clauses. These clauses require you to pay a penalty fee for paying off your loan early. If you are interested in doing just that, then you should look for a commercial loan that does not include prepayment penalties.
Use a Commercial Mortgage Broker
Many business owners simply do not have the time to call around and acquire numerous loan quotes. If this is you, or you would simply like to make the process easier on yourself, then you can get a commercial loan broker to do the grunt work for you. A commercial loan broker will query real estate lenders on your behalf to obtain a variety of loan offers. You simply need to provide your pertinent personal and business information to the broker so that he or she can deliver accurate quotes for you to review.
Negotiate Lower Commercial Real Estate Rates
Many commercial lenders are open to negotiations when it comes to finalizing your loan terms. Due to this, it never hurts to ask if there is anything you can do to have your interest rate lowered. Ask the lending company how they determine what rate they apply to each commercial loan. If you have already received a lower rate quote from another lender, tell them and see if they will match or beat it. Finally, if you can't get the commercial lender to lower your interest rate, see if you can reduce rates elsewhere. You may be able to save money on upfront costs such as lenders fees or application fees. |
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