Updated: Feb 27
Have your document ready to submit when leasing an office space so that you will not slow down the process.
What Financials Are Needed for a Commercial Lease?
There are several issues to consider before signing a commercial lease, and you must prepare your financial documents carefully before beginning this process. In the case of a startup company without a rental history or “paper trail” this is an extremely important factor. As with any legal consideration, when in doubt be sure to consult a qualified attorney.
If your business is a startup, landlords realize you probably won’t be collecting a profit for at least six months and possibly longer, and that you will have expenses in addition to rent such as inventory, payroll, and other financial obligations. Landlords typically require you to pay the first month’s rent, as well as a security deposit of no less than one month’s rent upfront, and may require more if you lack strong financials and credit. When presenting your financial situation to the potential landlord, keep in mind they are most interested in seeing what you will have left once you’ve covered all the upfront costs involved in the business.
Below are some typical requirements your future landlord will require before you can sign a commercial real-estate lease. These items are common to most leases but there are other specifics depending on the type of business you own and what type of space you plan to lease. Your landlord may ask for one or more of the following:
One thing to carefully consider is if you rely on a small-business loan for your funding, then you will most likely need a letter from your bank showing pre-approval for a specific amount of money that you can present to your future landlord.
Current credit reports/scores from all three reporting bureaus
Your credit scores are important for the landlord to know you have a good credit history and are likely to continue to maintain it.
Previous/current landlord references (for an existing business moving to a new location)
Just like a residential rental, your future landlord will want to know you have a history of maintaining your rental in the way the owner would for himself or herself.
Personal and corporate financial statement(s)
Most landlords require two years of financial statements. The financial statements need to include a profit and loss statement and a balance sheet. For a startup or sole-proprietorship, they will require the owner’s personal financial statement, since the business is basically you and whatever financing you have obtained in this regard.
A copy of your business plan
If you are an unknown entity, the landlord will want to see what your plan is to make money and become successful in much the same way as any lender.
Business bank statement(s)
These are designed to show you have the necessary funds to pay the rent both now and well into the future. Ideally, there would be sufficient funds to cover the entirety of your lease. It is important to the landlord that you will be able to pay the rent for up to a year until you turn a profit.
Prior tax returns
The landlord would typically want to see two years back for either your corporation or personal returns, or both.
To prepare for lease approval as a corporate entity, you will most likely need to present the following documents:
Certificate of incorporation
Articles of incorporation (with any amendments included)
Bylaws (with any amendments included)
Director names (all current directors must be listed)
Officer names (all current officers must be listed)
Certificate of good standing in your particular state in the case of moving your organization
Corporate Resolution authorizing the Officer to execute the Lease Agreement
Limited Liability Company (LLC)
To prepare for lease approval as an LLC, you will most likely need to present the following documents:
Names of current members and managers
Articles of organization (with any amendments included)
Certificate of filing
Certificate of formation
Names of current officers
Good standing certificate (when applicable)
Regulations (with any amendments included)
To prepare for lease approval as a General or Limited Partnership, you will most likely need to present the following documents:
Name of the general partner
Names of limited partners
Partnership interest percentages (where applicable)
Certificate of filing
Certificate of formation
Partnership agreement (and any amendments attached)
Starting a business and signing a commercial lease are very exciting, but it’s important to look before you leap. Make sure all your bases are covered to protect both you and your new landlord from disputes, misunderstandings, and legal wrangling before you move in. Make sure your paperwork is done correctly to save yourself a headache later on and hopefully you will enjoy a happy and successful commercial lease between tenant and landlord. Having your financial duck in a row prior to selecting a location also allows you to negotiate the lease terms from a position of strength. ~crownpointcommercial