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Should I Sign a Commercial Lease Without a Loan?


Patrice Pash discusses what to do when signing a commercial lease before you have a bank loan for your urgent care location.

Hi, I'm Patrice.

And today we're going to talk about a common problem that a lot of folks worry about during the startup process--what to do if they don't have their loan in place prior to signing a lease.

It is kind of the classic chicken and the egg scenario. And a lot of folks worry about, how can I move forward with signing this lease if I'm not sure if I'm going to have the funding or not?

Well, there are some things that you could consider and some sort of contingency plans if you will. The first thing to remember is going to the bank and getting this business loan is a little bit like if you've ever loaned money for a new house.

You can go to the bank and get a little bit of what we call pre-approval. So starting off by putting together all of your prospective financial statements, things like your pro forma, your business plan.

Even if you're not completely settled on a specific location, you might know at least the general area. You can put these documents together, find the lending institution of your choice, and go and speak with them. And say, "hey, here's my plan. This is what I think I need."

And get some pre-approval done. This can make you feel a lot more secure about entering into a lease without having the funding completely approved. Two, many leases can be signed with a contingency basically saying that the lease is based on your ability to get the loan acquisition.

Now, while many leaseholders are willing to do this, you should be aware that it could be with putting down some earnest money. So as long as you're OK with potentially losing some of that money if the funding doesn't go through or the lease doesn't go through, this can be a very viable option.

And lastly, also consider that even with lease and loan approval, contracting credentialing is still months from completion. And things could potentially go wrong with any of the payers that are involved in that process.

It's not likely. If you've done your homework, and you've checked out this location that you're looking at to start your urgent care, most of these potential circumstances could be mitigated.

So moving forward with having a lease but not funding really shouldn't be a high risk for you if you've taken the opportunity to go ahead and try to get some pre-approval from the bank, if you've spoken with the leaseholder.

And certainly, if you've done your demographic research, and you've talked with someone from contracting credentialing, you really can feel quite secure that most of these issues won't come to haunt you later on.

I hope you've found this helpful. And we'll see you next time.