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Now is a great time to buy, renovate, or refinance the real estate you need to expand your businesses. There is a surplus of well-priced commercial real estate on the market; for some, this could be a once-in-a-lifetime opportunity. Getting a loan is still challenging, though. By following these two commonsense strategies, you can improve your chances of owning your commercial property.
1. Have realistic expectations. While it’s true a lot of commercial real estate is experiencing double-digit vacancy rates, many property owners are still reluctant to make deep price cuts. Their expectations may be far in excess of a property’s appraised value. That means borrowers have to work hard to fully educate themselves on the market. If they don’t, they run the risk of putting valuable time and energy into the loan application process—only to have the deal fall apart at the last minute because they and the seller can’t agree on a price. Both the buyer and the seller need to work toward an agreement on a “fair” price based on the property’s real value. Most important, that price has to be in line with the lender’s appraisal. Good communication among all the parties involved can go a long way toward a successful outcome.
2. Stick with what you know. Whether your expansion plans include buying, building, or refinancing, it’s critical to stick with what you know. For lenders, there’s no clear sight line for when the economy will truly turn around and what the recovery will look like. They are seeking borrowers who have a track record of success, an established market niche, and a good understanding of industry trends. While taking risks may have gotten borrowers to this point, going outside their core business is generally not a good idea right now.
Most borrowers who have survived the recession and want to expand their existing business have great survival stories. These stories demonstrate to lenders that you know how to trump adversity, solve problems, and be flexible, and you should make sure lenders are well aware of your successes.
Business owners who are doing well have a rare opportunity to invest in commercial real estate at a time when prices are competitive and interest rates are low. How successful you are will hinge on having a realistic purchase plan and demonstrating your knowledge and creditworthiness.
CIT Small Business Lending Corp.
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