For many business owners, buying commercial real estate can be a major step toward greater control over their future. Instead of continuing to rent space, an owner may be ready to purchase the building or space within it where the business operates or invest in a property that can generate rental income.
Tropical Financial Credit Union offers commercial real estate loans for both owner-occupied and investment properties. Its business banking team works with companies across South Florida on loans ranging from $100,000 to $5 million.
That includes financing for owner-occupied properties, multifamily buildings with five or more units, office condominiums, plazas, and other business-to-business commercial properties. The credit union also offers financing for qualified investment properties, including non-owner-occupied real estate.
Meet Christian Flores
To help South Florida businesses navigate these important decisions, Tropical Financial has welcomed Christian Flores as commercial relationship manager. In this role, he originates business loans and commercial real estate mortgages for owner-occupied and investment properties.
Flores brings substantial experience from some of the nation’s largest banks. Before joining Tropical Financial, he spent nearly eight years as a business relationship manager with JPMorgan Chase. Previously, he served as a small business banker at Bank of America.
Across 14 years in business banking and 17 years overall with Bank of America, including work as a branch manager and mortgage loan officer, Flores has helped business owners access financing, manage cash flow, and plan for growth.
He recently shared his practical tips for businesses considering a commercial real estate loan:
1. Start planning well before you apply
Buying a commercial property is not usually a spur-of-the-moment decision. Flores recommends that business owners begin planning with their certified public accountant well ahead of time. Ideally, the process should begin as much as two years before a purchase.
Why? Because tax planning and loan qualification can pull in different directions. Business owners often use legitimate deductions to lower taxable income. But when applying for a commercial loan, the lender also needs to see that the business has sufficient income and cash flow to support the proposed payment.
“Show profit” is the essential message, Flores says. A prospective borrower should demonstrate that the business is in the black and can afford to borrow. Communicating long-term plans to a CPA can help a business owner balance tax strategy with developing borrowing capacity.
2. Get your financial documents in order
Commercial lending requires a thorough picture of both the business and its owners. Before applying, make sure your business and personal financial records are complete, current, and organized.
Tropical Financial generally looks for three years in business, along with business and personal tax returns. The team also evaluates income, existing debt, and overall cash flow. One key measure is debt-service coverage: for every dollar of debt payment, the lender generally wants to see at least $1.25 available to cover it.
Clean, well-prepared financials help the lending conversation move forward. If tax returns show little or no income because deductions have substantially reduced reported earnings, that can limit how much a business can borrow, even if the owner feels the company is doing well operationally.
3. Build reserves and prepare your down payment
Reserves mean money set aside in checking, savings, or other readily available accounts. They help show that a business can handle the unexpected: a broken piece of equipment, a replacement, a staffing need, or another unplanned expense.
Reserves can also support the down payment required to purchase a property. Flores notes that buyers should generally expect to contribute at least 20% toward a commercial purchase. In some situations, lenders may also require a borrower, particularly one new to commercial real estate, to maintain enough savings to cover several months or even a year of loan payments.
4. Look beyond the interest rate
The rate matters, but it is not the only factor in determining whether a purchase makes sense. Flores encourages buyers to focus on whether the property works within the business’s cash flow and whether the company can remain profitable after accounting for all ownership costs.
Those costs may include the loan payment, property taxes, and insurance. The last, in particular, can be a significant expense in South Florida, where a property may require hazard, windstorm and flood coverage. For investment-property buyers, the numbers must also leave room for a reasonable profit margin.
At the same time, higher rates can create opportunities. Flores sees that sellers whose balloon loans are coming due may be more motivated than they were several years ago, especially when properties do not appraise at the expected value. A buyer may be able to negotiate a lower purchase price, seller-paid closing costs, or other incentives that improve the overall transaction.
5. Choose a lender that knows your market—and your business
At Tropical Financial, local people quickly make commercial loan decisions. They understand the communities and businesses of Miami-Dade, Broward, and Palm Beach counties professionally and personally, because they live there. That can make a meaningful difference from large banks, where underwriting or final decision-making may occur in another state and require additional layers of review.
Flores experienced that difference firsthand during his years at national banks. At a large institution, commercial lending can be highly standardized: if a request falls outside a preset box, the answer may be no. At Tropical Financial, a local business loan committee can consider the full relationship and the business case behind a request when making sound lending decisions.
That does not mean documentation and credit standards disappear. It means borrowers can have a direct conversation with experienced local bankers who understand the company’s story, goals, and connection to the community.
Tropical Financial can also consider options such as up to 85% financing for owner-occupied properties, 30-year amortization in appropriate cases and qualified financing for commercial investment properties, areas that Flores said may be more limited at some of the largest banks.
A commercial real estate purchase is a significant commitment, Flores says. The best first step is to speak with him or another member of Tropical Financial’s Business Banking team early, ask questions, and begin preparing well before you make an offer. To speak to a business banking officer, call (888) 261-8328.