What You Need to Know About Industrial Loans
Industrial loans are generally used for purchasing or renovating commercial property. MBS & Finance Corp is one of the important Industrial loan brokers in New Jersey. There is a rule about these kinds of loans. Lenders require that the property is owner-occupied. It means that your own business should occupy at least 51% of the building.
There are three requirements that need to be fulfilled before an Industrial loan is granted by the Industrial loan brokers in New Jersey. These requirements are ones related to
The property’s characteristics
Business’s finances and
Let’s take a look at these factors in detail:
The property that is being financed by the loan broker acts as a guarantee. The lender has full rights to seize the property if you do not repay within the stipulated time. It is required that your small business occupies at least 51% of the building. If not you can apply for an investment property loan that is more suitable for rental properties. The individual or company gives loans according to the value of the property. The property can be any commercial property and single-family residences do not qualify. A multi-family residence is eligible if you run your business out of it and the business occupies 51% of the property.
These loans obviously require more scrutiny than residential mortgages. There is no guarantee of success with a small business. Banks and lenders will have to verify if your business has the cash flow required to repay the loan. The lender will calculate the company’s debt service coverage ratio which is
Your annual net operating income (NOI) / annual total debt service
The ratio between these two should be 1.25 or greater as a typical requirement.
The lender will also verify the credit score of the business. A minimum credit score of 140 is required by the FICO SBSS. In case of a loan to a sole proprietorship, it would be considered a personal loan putting your personal property at risk in case of default.
In this case, commercial lenders will want to verify your personal credit score and history. If there are instances of financial problems in the past, like defaults, foreclosures, tax liens, court judgments, and more, a low personal credit score will greatly reduce the chances of a commercial loan getting approved.
Also, Read: Small Business Loans in New Jersey