Applying for a commercial or personal loan? Read on to find out what lenders are looking for.
05 May 2022
When you apply for a commercial loan, or any loan for that matter, the lender asks itself one big question:
“How likely is it that this borrower will repay the loan?”
So, when lenders assess your commercial loan application, what they’re really doing is trying to answer that question.
1. Your income. Whether you’re applying for a commercial loan as an individual or a business, lenders will want to see evidence that you have the income needed to make ongoing monthly repayments.
2. Your expenses. Lenders also need to be assured that your expenses aren’t too high relative to your income, otherwise you might struggle to make your monthly repayments.
3. Your deposit. Bigger deposits mean less risk for lenders; smaller deposits mean more risk.
4. Your security. When you apply for a commercial loan, you’ll have to offer a form of security (or collateral), which, generally, will be the commercial property you’re planning to buy. The lender will then ponder this question: “If the borrower defaults on the mortgage, and we have to seize their property, will we be able to sell it for a high enough price to recoup our money?” So, lenders pay close attention to the property’s potential resale value when deciding whether or not to sign off on a commercial finance application.
5. Your credit score. As part of their due diligence, lenders will look at your personal history or your business’ history of managing credit.
From a lender’s perspective, assessing a commercial loan application is trickier than assessing a residential loan application. As a result, the assessment process can be more subjective and complicated, which can make life harder for the borrower. That’s why, whether you want to borrow as an individual or a business, you’ll find the process much easier if you have an experienced credit advisor on your side.