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How to Get the Best Commercial Mortgage Rates for Your Business

September 5, 2013

Getting a great commercial mortgage rate can mean a huge difference in the total cost of the loan. Even differences of a fraction of a percent can add up to hundreds of thousands of dollars, depending on the size of the loan.

Getting good rates from a commercial mortgage bank can also mean saving thousands over the cost of renting a similar space. Over the long haul, owning the commercial property you do business out of is much more economical, provided you get a good rate. This is above and beyond the simple benefit of ownership – being able to do whatever you need to with the building without cutting through the red tape of dealing with a landlord.

It’s frustrating to business owners, however, that it is quite difficult to estimate the best rate they can get from a commercial mortgage bank. The amount of information that commercial mortgage banks require to give an accurate rate estimate can seem overwhelming, and makes shopping for rates difficult at best. Still, there are some steps that any business can take to help get the best commercial mortgage rates possible.

Have Your Accounts Prepared By a Professional

The process of finding the best commercial mortgage rates can be made significantly easier if the businesses accounts have been prepared by a professional and meet the generally accepted accounting principles (GAAP) going back as far as possible. This is one of the best ways to prepare for applying for a quote from a commercial mortgage bank. Getting the accounts up to spec every year will also save the difficulty and cost of trying to update past accounts all at once when it’s time to submit a loan application. You should have at least three years of accounts ready, but more is better.

Determine If You Will Be Renting Out or Using the Property

Many banks have a preference for commercial mortgages on owner-occupied property. That means you are much more likely to get a better rate if you use the property you are purchasing for business activities instead of for rental income. Some banks might be more flexible about owner-occupied vs. rental properties, but if you plan on using your new property for rental income, you will get the best rates if you approach a commercial mortgage bank that specializes in rental properties.

Building/Business Type

The commercial mortgage rate you’ll pay largely depends on the business you run and the kind of building you’re purchasing. Certain investments that are considered safe, such as office buildings or apartment complexes, or manufacturing or warehousing expansions for successful companies showing strong growth, will receive preferential rates. Restaurants, retail locations, gas stations, and similar higher risk businesses will usually end up paying higher rates, or will need to show a strong history of success in that type of venture.

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