5 Myths About Commercial Lending You Need to Know
Most people can agree that financing plays a major role in commercial real estate. After all, very few players have access to the upfront capital necessary for large and complex deals, and the risks associated with that can be substantial. Many potential borrowers find themselves on the fence when it comes to pursuing commercial loans, often due to having heard one or more myths about financing.
But commercial loans can be exceedingly beneficial when approached correctly, and it helps to have an idea of what to look out for. Here are five myths about commercial lending you need to know about in order to find the loan that’s right for you.
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Myth 1: Taking Out a Commercial Real Estate Loan Requires a Large Down Payment
Many borrowers believe that lenders require high down payments to secure a commercial loan. The fact is that the current business climate is strong, and borrowers can negotiate favorable terms and low down payments, as low as 10 percent.
Myth 2: Good Deals are Hard to Find
Since fewer people have exposure to the commercial real estate versus the residential real estate market, many borrowers find the commercial market more mysterious and believe that good deals are difficult to find. Compare today’s market to that of 10 years ago, however, and the differences are extraordinary.
With technology and the advent of proven private lenders, it’s easier than ever to find great deals on commercial real estate. And often commercial real estate offers better return with lower risk than investments in residential real estate.
Myth 3: Only Big Bank Loans Should Be Considered
Big banks have their place, but it’s no surprise that many people in both the residential and commercial markets are increasingly shying away from dealing with them. Today’s borrowers want flexibility in their lending, as opposed to high interest rates and a myriad of forms and restrictions.
This is just one of many reasons that smart borrowers are more and more turning to private commercial real estate lenders, as the benefits they offer are far and beyond what’s possible when working with a large bank.
Myth 4: You Need Great Credit to Get Started
One of the biggest myths in commercial lending is that the ability to get a loan relies on personal credit. It’s certainly an understandable assumption, but commercial loans are often taken out by a business entity and not the individual, and private lenders seek the property as collateral. For these reasons, personal credit does not play into the equation.
Thus, if you have a history of not-so-great credit, you should still be able to secure a commercial real estate loan.
Myth 5: Personal Assets Are Always on the Line With Commercial Real Estate Loans
No one wants to risk their own personal assets on a business venture that may not pan out, and this is one of the biggest fears that borrowers tend to have. Most lenders require personal guarantees on any loan.
One of the best ways to ensure that personal assets are never on the line is to consider private lender that offers non-recourse loans. Non-recourse loans do not require the personal guarantees of borrowers—in other words, non-recourse lenders can’t go after you personally if the loan doesn’t work out.
Not sure where to start? Learn more about private lender non-recourse loans from iBorrow, and get started on your path toward success in the commercial real estate space.