Entrepreneurs and experienced business professionals often face overwhelming tasks when starting a new business, including the lease approval process. One of the most critical first steps to ensure success is getting approved for a lease on a commercial space. Without a dedicated commercial space, customers, clients, and staff members won’t have a central hub to conduct business.
Negotiating a commercial space lease requires due diligence and preparation. As a company decision-maker, you will need to answer questions about how long a commercial space lease should be, how much square footage the operation needs, and what fits into the upstart organization’s budget.
Proving that your company can reliably pay the lease on time and fulfill all the terms requires substantial documentation. Here’s what you need to know to navigate this process successfully.
Requirements for a Commercial Lease
It’s essential to understand that commercial space property owners tend to be highly selective when agreeing to lease space. Their decision-making process revolves around how the presence of a new company impacts the facility. Only after evaluating whether a business owner is suitable will property management teams accept and vet a lease application. Some items required to gain approval to lease a commercial space include the following:
Commercial Spaces Lease Application
A comprehensive application is key. Property lessors generally prefer tenants who fill out the entire application and include references. This helps landlords assess your reliability.
Business Plan
New businesses are more prone to failure than established ones. A detailed business plan demonstrates your vision and ability to manage the business successfully. It should outline your operational strategy, market analysis, and financial projections to instill confidence in potential landlords.
Tax Returns
Most landlords will require copies of your company’s tax returns from previous years. For new businesses, including personal tax returns of the owners or partners may also be necessary to gauge financial stability.
Credit History
It’s not unusual for landlords to review an applicant’s personal credit history as well as the business’s score. This is particularly true when relatively new companies are involved, as a solid credit history indicates reliability and financial responsibility.
Assets
When securing a lease for a commercial space, you’ll need to demonstrate that you have adequate financial resources to meet lease obligations. This usually requires applicants to demonstrate cash on hand as well as collateral. Bank statements, equipment, and other assets indicate you have the resources to fulfill a lease agreement.
Financial Security
Another strategy that can improve your chances of securing a suitable commercial lease involves financial security. For example, organizations with substantial holdings or extensive lines of credit demonstrate an ability to make monthly installments. This generally reduces the risk commercial space owners assume when approving a lease.
Typical Commercial Real Estate Lease Term Lengths
While knowing how to get approved for a commercial lease is essential, business leaders must also negotiate reasonable terms. A good deal is always one that benefits both parties, and the length of the lease is important.
Most small to medium sized commercial space leases typically run between 3-5 years, with larger corporations tend to lease for 5-10 years. Upstart outfits may be best served by requesting a lease on the shorter end of the spectrum with options to renew. When negotiating this aspect of a commercial space lease, it’s also important to run the numbers on cost increases before signing.
How Do You Get Approved for a Commercial Lease?
Securing approval for a commercial lease involves several strategic steps:
- Prepare Your Documentation: Gather all necessary documents, including your business plan and financial statements. Being organized and thorough demonstrates professionalism.
- Demonstrate Financial Stability: Be transparent about your financial situation. If there are any blemishes on your credit, be prepared to explain them and discuss how you’re addressing any concerns.
- Communicate Effectively: Engage openly with potential landlords. Ask questions about lease terms and express your commitment to maintaining the property and fulfilling lease obligations.
- Negotiate Terms: Be ready to negotiate aspects of the lease that may not align with your needs. A collaborative approach can help find common ground.
- Seek Legal Advice: Before signing any lease, consult with a legal professional experienced in commercial real estate. They can help you understand the terms and protect your interests.
- Follow Up: After submitting your application, a polite follow-up can demonstrate your interest and commitment, keeping you in the landlord’s mind.
Grow Your Business in a new Commercial Space
Knowing how to get approved for a commercial lease is a significant first step in establishing a company’s physical footprint. By preparing a complete application and demonstrating that you and your organization can fulfill the responsibilities outlined in the agreement, newly formed companies can promptly get to work and start achieving their business goals.
The team at Summit Properties works diligently to ensure all parties clearly understand their rights and obligations when entering into a commercial lease agreement. If you are considering renting commercial space, contact us today at (519) 914-2766 or email us at nadine@summitproperties.ca to get started!