When you are seeking a commercial real estate loan, you want to make sure you get the best terms possible. While many people think that whatever the financial institution offers is all you can get, there is usually some room for negotiation between you and the lender so that everyone can get the best arrangement possible and everyone walks away happy. Here are some thing to consider if you want to negotiate better terms for your loan.

Factors for Qualification

The first step in negotiating the best terms for your commercial real estate loan is to know what the qualifications for the loan are. Knowing the qualifications will help you put your organization in the best context for the application process, which can help with your negotiations. Some factors used in the qualification process are:

  • Loan-to-Value Ratio
  • Property Value
  • Debt-Service-Coverage Ratio
  • Liquidity
  • Net Worth
  • Credit Rating

Evaluating these factors within your organization gives you a starting point for negotiating better terms for your commercial real estate loan.

Questions to Think About

As you are thinking about your ideal terms, there are specific questions that you should think about prior to negotiations. Two of these questions are:

  • Is the rate adjustable or fixed?
  • Do you want long-term permanent financing or short-term financing?

Knowing the answers to these questions can help guide your negotiations so that you get the terms you want. When you know what you want and need, you can figure out your bottom line in negotiations. From there, you can determine what areas you’re willing to concede in order to get what you want.

You don’t have to settle for the terms offered by the financial institution. Negotiating better terms can help ensure that you get what you need while the financial institution still gets what it wants. Knowing the factors for qualification and what, exactly, you want and need will give you a good starting place for your negotiations.