Entrepreneurs and experienced business professionals sometimes face overwhelming tasks when starting a new business. How to get approved for a commercial lease ranks among the critical first steps to ensure success. Without commercial space, customers, clients, and staff members won’t have a central hub to conduct business.
Negotiating a commercial lease requires due diligence and preparation. As a company decision-maker, you will need to answer questions about how long a commercial 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. However, the following information could prove invaluable when learning how to get approved for a commercial lease.
Requirements for a Commercial Lease
It’s essential to understand that commercial property owners tend to be highly selective when agreeing to lease space. Their decision-making process typically 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. These are items often required to gain approval to lease a commercial property.
Application
Property lessors generally prefer tenants who fill out the entire application and include references.
Business Plan
Newly-minted companies are more prone to failure than established ones. A detailed business plan engenders confidence you will be able to pay the monthly lease.
Tax Returns
Companies that have filed in previous years generally must include copies of returns. For newer organizations, copies of the partners’ personal tax returns may be necessary.
Credit History
It’s not unusual for lessors 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.
Assets
Securing a commercial lease 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.
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 building 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.
Commercial real estate leases typically run between 3-5 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 lease, it’s also prudent to run the numbers on cost increases before signing.
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 goals.
The team at Summit Properties works diligently to ensure all parties clearly understand their rights and obligations when entering 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!