Guide to Commercial Mortgage Lenders

Prepare your financials

Commercial mortgage lenders want to see hard evidence that you can repay the loan, including financial statements, balance statements, profit-and-loss statements, projected cash flow statements and more. Lenders may want to see a business plan as well as background information on you and your partners.

I recommend: Keep this commercial loan readiness checklist handy so you know which financial statements to prepare. Download a sample balance sheet and a profit-and-loss statement from UrgentBusinessForms.com, which also sells templates in Excel, PDF and Word formats. A downloadable template for cash flow projections is available from 1000Ventures.com.

Know your ratios

Most commercial mortgage lenders require certain percentages for three important ratios: debt service coverage ratio (DSCR), loan to value ratio (LTV) and debt ratio. DSCR is the net operating income divided by the mortgage payments. LTV is the total loan amount divided by the fair market value of the property. Debt ratio is determined by dividing your monthly debt obligations by your monthly income.

I recommend: Keep abreast of commercial loan rates and use the debt service calculator courtesy of CommercialBanc.com to estimate your DSCR.

Shop for mortgage lenders

The commercial mortgage and commercial lending market is crowded with bankers and commercial mortgage brokers eager to place your loan. Choosing one requires careful consideration of rates, terms, duration, down payment and other conditions. Often the bank that handles your business checking accounts may be willing to offer you a commercial mortgage loan at an attractive rate or with favorable terms in order to get more of your business.

I recommend: Among the big banks that offer commercial mortgage loans to small businesses are Wells Fargo, Citibank and Wachovia, which allows you to apply online. Among the numerous online services that help you shop for commercial mortgage loans are iBank and Businessfinance.com. Fill out a short online form at BuyerZone.com to receive quotes from several commercial mortgage lenders.

Negotiate a deal and close the loan

Choose two or three lenders that seem to offer the best deals and most closely match what you need. Negotiate with each one, letting them know that you're shopping several other sources. Having options gives you at least some leverage in the negotiation process. Once you have decided on your top pick, proceed to finalizing your commercial mortgage loan. It's wise to use an attorney to review the loan documents and make sure your interests are served and protected. Your attorney can also help walk you through the closing.

I recommend: The Capital Consortium offers a number of sample mortgage loan documents online for review. Find an attorney who specializes in real estate at AttorneyPages.com.