Your Commercial Lender Interview – How to be Ready to Wow Them!

Talking to a commercial lender is a little different than talking to a traditional residential lender. A residential lender wants to know about your credit and your income to see if you can afford to pay back the loan that you are getting against the property you are buying. They only look at you because your personal residence isn’t going to help pay for itself. Your commercial property is going to help you pay the mortgage and so they are going to look at the property and you.

When you are preparing to talk to the commercial lender be prepared for them to pull your credit. They want to know your financials. They want to know if you pay your bills and if you pay them on time. They want to know if you have had a bankruptcy or a foreclosure in the past. A bankruptcy can be very difficult to overcome in the commercial world. They are also going to look at your reputation as you start working in the commercial industry. They want to know what people think of you. Are you honest? Do people feel like you treat them fairly or do they feel like you take advantage of them? As a side note, most lenders are going to require that you have a personal guarantee on the loan that you are trying to obtain

They are also going to look at your ability to repay the loan. They want to know how you are planning on repaying the loan. Are you planning on just using the cash flow from the property? Do you have any kind of a slush fund if there is a bad month? Do you have enough income to pay the loan if the property doesn’t perform as anticipated? If the property is an already existing property, then they are going to look at the property’s financials to see how well it has been performing. They will take that into account when they are determining if this is a good investment.

However, if this is new construction, there is no history to review. That means that you may want to borrow enough money to cover the first few payments until you are able to get the property rented and bringing in income. You may need to bring in private equity partners to help fund the property until it is off the ground.

They also want to know how much skin you have in the game. They want to know how much of a down payment you are putting into the property and where that down payment is coming from. If all of the money is coming from your investors, they may be a little leery of that if you have really bad credit or a really bad credit history. They want to know for certain that if the project hits some bumps you are not going to walk away because you don’t have anything invested in the project. They want to make sure that you are going to hang on no matter what.

Finally, they want to know what the collateral is going to be and what the current market conditions are. They want to know that if they have to take back the property, they are going to have enough equity that they can get back the money that is owed to them. They want the property to be the collateral, but they also want to know that the market is going to continue to support the amount that you have borrowed or that it will continue to appreciate. Because of that, the lender is going to look at the market conditions. No matter what you tell them, or what research you have done, the lender is going to require a feasibility study to back up your information. They want to know that a third party agrees that this is a good investment. This is part of why a feasibility study is so crucial. They are going to believe the feasibility study over you every day.

Take the time to prepare for your interview. You don’t want to wing it. You want to make sure that you are prepared to answer their questions professionally so that they believe in your project as much as you do. As always, happy investing.