As a landlord, you definitely want to lease your property to a person who will less likely default or persistently get late on paying the rent. To be able to do this, you will most definitely have to peek into that someone’s creditworthiness. The ‘Commercial Lease Application’ exists to play this vital role.
It is basically a form that gives the landlord the opportunity to dig deeper into a potential tenant’s creditworthiness principally by examining the details of the person’s business. A fee is levied in the course of accessing this vital piece of information that ranges from $50 to $200.
In its entirety, the process entails skimming the gross income and expenses of the business, bank balances, and the rental history of the tenant in question. The study also weighs the possibility of the principals of the business using a personal guarantee to safeguard the lease.
Reasons to use an application process
Safeguard the Income Stream
First and foremost, a landlord needs to use this form to safeguard the income stream. Landlords, like any other business person, primarily exist to make a profit. Anything that can compromise or threaten the profitability of his venture must hence be contained appropriately. This form provides a suitable hedge.
As part of safeguarding the income stream, the landlord definitely wants to minimize defaults. This simply means seeing to it that the rental dues are remitted in a timely manner. Only by hosting a person with a sterling rental track record may this feat be realized.
Reduce Late Payments
After defaults, come risks of late payments. These are rental dues that are remitted but consistently outside the timeframes that are recommended. When rental dues are paid past the deadlines repeatedly, the end result might not always be desirable. That is why a landlord wants to host only a person who is more likely to pay the dues in time.
Avert unnecessary Legal Squabbles
With persistent defaults and late payments come the possibilities of legal squabbles. These issues are often referred to as the rental dispute tribunals for settlement. No sane landlord would want such an eventuality to befall him. That is why he desperately wants to put in place measures that may prevent the same from happening at all costs.
Guarantee Some Peace of Mind
The sum total of the benefits above boils down to one thing: the need to uphold the peace of mind at all times of operations. By using this form, the landlord has the long term benefit of guaranteeing some peace of mind to him. This is definitely a good thing as it lets the landlord enjoy his time and property.
How to Perform a Business Background Check?
Step I: Receive the rental application
It goes without saying that you must first and foremost receive the rental application form from the prospective tenant. Upon receiving this application, the landlord is to determine at face value whether or not to consider the tenant for the space that is available. It is only after that that the rest of the steps may apply.
Step II: Confirm the business with the state
If you decide that the business is worth renting the space to, you should now go ahead to confirm the business with the state. Each of the States that makes up the Union has an office of the Secretary of State that basically vouches for the credibility of the businesses that operate within its borders.
Step III: Search for the business’ PAYDEX Score
Now go-ahead to search for the business’ PAYDEX Score. This one determines and showcases the credit score of the businesses. Basically, those businesses that have an excellent track record of payments have higher scores and vice versa. The score is provided for the by the relevant state agencies
Step IV: Demand the personal credit check
Other than the track record of the business itself, it is also necessary to skim the personal credit records of the owners of the business itself. Several sources exist to play this role. Below are some of the most reliable sources alongside the amounts of money they demand, respectively:
- E-Renter.com – $32
- MyRental.com – $30
- RentPrep.com – $28
- ScreeningWorks.com – $30
PS: For a person to be considered credible for commercial leases, a minimum credit score of 700 is a must.
Step V: Contact the relevant referees
Each business forms associations with other business entities and commercial enterprises. These entities may also serve to prop and vouch for the business’ creditworthiness. Thus, you should also make it a point of seeking more information from them with regard to the credibility of the business in question.
Step VI: Ask for a personal guarantee
If, after going through all the steps above you are not yet satisfied with the credibility of the potential tenant, you should demand a personal guarantee. This is basically a person that is well-known to the business and may also continue paying rent in the event of a default on the part of the principal tenant.
Step VII: Make up your mind
Having examined all the details above, you should now be able to make up your mind appropriately. Use the details above to do so. Obviously, this requires that you draft a tenancy contract and deposit the same with the relevant authorities. If you feel otherwise, you should draft a rejection letter and channel the same to the applicant.