How to Discover if a Commercial Tenant Is Financially Sound

By 21st May 2013Blog

The ability for a commercial tenant to pay the rent in full and on time is of the utmost importance. You rely on that monthly cash flow to cover all the expenses of owning a commercial rental property. The last thing you want is a tenant to shortchange you, for this may force you to use your own financial resources to cover the cost of a mortgage or taxes. The only way for you to find a commercial tenant who is financially sound and honest is to conduct a Business Credit Check. If you are unsure what data needs to be collected in order to know the business credit history of a company, can guide you through all the steps with our quick and accurate Business Credit Report of prospective commercial tenants.

The business credit report will reveal an in-depth picture of the rental applicant’s financial profile. First, it will show if the company has a large number of creditors. If so, there will be a number of excuses to give you in case of delays of rental payments. It is unlikely that this is the sort of company that will keep each of their creditors happy by paying them all on time. Second, it will uncover any bankruptcies. This indicates that the officers of the company are either not very good at managing its finances or not adept at running a business. In the former case you will need to question whether they have learned their lesson and will now be more prudent in financial matters. In the latter it would be a good idea to carefully examine what this company’s business ventures have been in the past and what they are currently planning to do with your commercial property. If these business ventures seem to be too risky, you should definitely consider denying the application. Third, it provides information on the number and types of bank accounts of a company. If there has been only a single account for less than six months it might not be wise to rent your unit to this commercial applicant.

Just because a company has a number of offices, or is a relatively well-known name or brand, that doesn’t necessarily mean they don’t have a history of problems or are currently facing financial difficulties. A business credit check will reveal to you the company’s financial situation. It will present you with scenarios of companies with a lot of debt; those with meager earnings who have borrowed large sums of money from different banks; others with long histories of financial problems, such as being overdrawn at banks and bouncing checks. In the end, the exact nature of a tenant-landlord relationship is one of money being exchanged for an asset (a commercial rental unit). The business credit check will then give you an indication of how the company is likely to behave in this financial undertaking.

It is far better to learn all these things before you rent out the unit. Like most people you probably live a busy and hectic life. Time spent with problem tenants takes you away from more important business matters, loved ones, and leisure activities you enjoy pursuing. Add to this the legal and financial hardships that would certainly arise, you can see why a business credit report is absolutely necessary. Although it cannot guarantee that the company’s financial behavior will continue as shown in the reports, it will certainly keep you well-informed and alerted about the risk involved with a particular company.