When you ask for commercial property financing, you may be requested to submit a business plan. It is okay to provide an overall overview of your business to your lenders; however, it is not safe to specify intricate details of your business in the plan. Some lenders may not offer loan if you do not give them an exhaustive business plan. You should choose lenders who are satisfied with the documents you can give. There are lenders who demand tax returns of several years. These people will closely monitor the way you use the tax returns. During periods of low net income, you might have used the tax returns. Even after loan period, the lenders may monitor your tax returns, which is undesirable. Choose those lenders who grant you financing with stated income.

Many times, it is not easier to find financing for special purpose properties. If you are buying an office or retail building, you won’t have problem in finding finance. However, if you need restaurants or other spaces for your business, you may find it difficult to find a lender. You have to search the internet to find such lenders who offer lower interest rates for such special purpose properties. Sometimes, lenders may decide not to avail loans for certain types of businesses. Even though they do not explicitly exclude such people, they may grant a loan with very stringent requirements. You should not choose a loan with tight requirements because you may lose money at the end.

You have to always find loans for a longer period. It is better to avoid short term loans when you intend to buy commercial properties. A 15-40 year loan is always preferable as you can manage the mortgage loan with lower monthly payments. Lenders may use terms like recall or balloon to shorten the loan period. These loans may be short term loans, no more than seven years. You can use this type of loans if you have cash flow for higher down payment.

As a business owner, you should not use your personal property as collateral for commercial property financing. The debt coverage ratio (DCR) is a normal estimate used by lenders to decide whether they can offer you loan. This ratio tells your ability to repay the loan. Normally a DCR of 1 to 1.2 are preferred by lenders. This means that you have to pay one dollar towards debt for every 1 to 1.2 dollars you make using your business. This means your net income should be between 100% and 120% of your debt payment every month. You should always look for lenders who offer lower processing fees without the need for upfront commitment fees.

Source

If you currently lease or rent a building to operate your business, you can consider buying a space for your business to operate. Any facility that you use for commercial purposes or generate income out of it can be called a commercial property. Hence, with loans for commercial assets, you can buy an office building for your business. The rent you spend for your current building can be used to pay for the loan and at the end; your business will have its own office. With rental spaces, there is no guarantee that you can operate the business in the same space. So, to become an established entrepreneur, you need your own office.

The present real estate market is not good for the sellers. However, it is the right time for buyers. Even if you have your own office space, you can consider buying a retail or office space as an investment. If you have business cash flow, you can add it to the your income which will enhance your ability to obtain a loan and buy a commercial building. Many investors are now selling their properties for a lower price to generate cash flow. You can take advantage of lower prices as well as lower interest rates of the banks to add value to your business. The office or retail building you buy generates income and hence, you can gain greater advantage.

With a loan for commercial property, you can save money in terms of tax benefits. The government provides a number of tax exemptions when you have property loans. You can use this and save on your taxes while owning a commercial real estate Even though the real estate market is down currently, you can expect the occupancy rates to boost up during later years. So, the commercial property that you buy now will increase in value in the future. This will generate more cash flow and increase financial statements of your business. Your building becomes valuable when the inflation and appreciation hits the market.

Owning real estate now can give you great benefits in the future. As loans for commercial property can be easily obtained from lenders, you will be a proud owner of a piece of commercial real estate with the correct documentation. Later, when you want more cash for your business, you can sell the property for a higher price. Also, when you decide to retire or quit your business, you can sell your business for a higher price with additional assets attached, including the building. In all possible ways, commercial properties can help you and it is now the right time to invest in such properties.

Source

Actually, I do, and I want to be very precise with my strong buy recommendation. This article is specifically for business owners who are currently leasing space and who also intend to be in business for at least the next 10 years. If that’s you, the remainder of 2009 may present the best buying opportunity you will see in your lifetime. Consider the following:

1) You Need a Place to Operate Your Business

This may seem obvious, but unless you’ve set up shop in your home, every business needs space to operate. You’ve already decided to be in business, now you must choose to either rent or own your space.

Real estate rental costs are typically the third largest expense a business incurs (after payroll and taxes). On average, lease payments typically increase by 3% or more per year, every year. Finding an ideal location to purchase can convert this large, consistently growing expense into an investment that you will someday recapture, hopefully with a nice profit, when you eventually sell the property.

Furthermore, you will be the owner of all tenant improvements you make to the property and never need to worry about a lease not being renewed or having a property sold out from under your business. Don’t underestimate the pride of ownership you will feel as the owner of your business and the place from which your business conducts its business.

2) We Are in a Buyer’s Market

This year is clearly a bad year for many commercial property investors; rental rates are down and vacancies are high. These investors, unlike business owners, depend on the rental income their property generates to pay the mortgage. The vast majority of investment property loans have balloon payments every 5, 7 or 10 years. In today’s unstable market, banks are very conservative with property valuations and refinancing investment properties is harder than ever.

Many investors need to sell properties, even ones with positive cash flow, due to a lack of available financing. As a consequence, there are a large number of attractive acquisition opportunities available at historically low prices relative to the cash flow they can generate.

The investor’s challenge is your opportunity. As a business owner you will use your business’ cash flow to cover the mortgage expense. There is a good chance that you are already spending most if not all of the mortgage payment as rent.

3) Short Term Value Fluctuations Don’t Matter

The idea is not that your owner occupied real estate is somehow immune to down market cycles. The point is that as a business owner you don’t particularly care because you have no intention of selling in the short term. Certainly all property owners hope to enjoy increasing property values, but for owner occupied properties it’s not a day to day concern.

4) Historically Strong Inflation Hedge

Commercial Real Estate has a long history of being an excellent hedge against inflation. Over the long term, commercial properties tend to increase in value at a rate approximately two percent higher than the rate of inflation. Large deficits combined with huge increases in the money supply are going to lead to high inflation at some point. It’s already baked into the economic pie. When that inflation hits, your commercial property will become more valuable. Additionally, you will be paying your mortgage with dollars that are increasingly less valuable.

5) Outstanding Exit Strategy Options

When you one day decide to retire, owning the property will provide several attractive options. You will be able to sell the business and lease the property to the buyer; sell the business with the property, increasing the business value and making the transaction easier to finance, or sell the business and the property to different buyers.

6) Make Your Accountant Happy

Property ownership provides many tax benefits and can help shelter business income. Interest deductions, depreciation, amortization, 1031 exchanges and other benefits will help you keep more of what you earn. Speak to your accountant to gain a better understanding on how commercial property ownership can help you keep more of your income and reduce your tax burden.

7) Excellent Financing Options are Available

Outstanding financing options are currently available to help business owners purchase or refinance owner occupied commercial properties. Several underutilized loan programs can provide up to 90% financing for qualified projects. These loans are fully amortizing, so you never need to worry about facing a balloon payment either.

It’s hard to get up the courage to invest in commercial real estate when the market is in turmoil, but I urge you to consider doing just that. The benefits of ownership are compelling and the timing is right.

Source

Despite these gloomy statistics some industries are literally thriving as a direct result of the adverse economic conditions. The budget sector in particular is enjoying record growth with companies such as Travelodge planning massive commercial property expansion. The budget hotel chain has exchanged on twelve new hotels recently and is expanding into prime locations that pre recession would have been unavailable to them.

Poundland, Aldi, Lidl and Cost Cutter are also amongst the credit crunch winners. Consumers are naturally looking for ways to make their lowering disposable income go further and are turning to budget providers. Aldi in particular are experiencing record growth and have extensive commercial property plans in place, with the aim to open hundreds of new stores throughout the UK over the next five years.

The recession has led many people to make lifestyle changes. Consumers are still looking for the same end result for example, a night off the cooking, but are now going for a cheaper alternative such as a takeaway pizza rather than a fancy meal out. Fast food takeaway providers are thriving as people opt to have a cosy night in with a takeaway over a night on the town. McDonalds alone have plans to open ten new stores in the UK in a big commercial property deal and DVD rental providers and board game suppliers are seeing unprecedented sales increases. At a time when fifty seven pubs are closing every month businesses such as DVD rental company The Movie Booth are looking to cash in on the new staying in culture. Introducing options such as the “great night in” package to their DVD rental range.

In another behavioural change consumers are helping to boost the sales of cheese and other sandwich fillings as they look to save up to £5 a day by preparing their own packed lunches, rather than buying prepared shop brought sandwiches.

Businesses that are in the commercial property industry are looking to cash in on these credit crunch success stories.

Source