With 300,000 small businesses in Alabama, there are plenty of potential tenants for your Montgomery commercial property.
Anytime you have a large pool of potential tenants; however, you have to perform thorough tenant screening to find the right candidate. Doing commercial tenant screening is both similar and different to residential tenant screening.
In this post, we'll explain some tenant screening best practices for commercial landlords in Montgomery. Keep reading and you'll know exactly what you need to do to find the right commercial tenants.
Review the Application
Like with residential tenant screening, you need commercial tenants to fill out an application. An application asks for pertinent information about the business, allowing you to weed out the worst candidates and select the best.
On the application, ask for the business name and how long they've been operating. You may also ask for financial information and references from previous landlords.
Verify the Company
When going through applications, the first step is to verify each company's existence with the state. All you need to do is look the business up in the state registry to find out where they stand.
A business that isn't in good standing with the state can't be trusted to pay rent on time. It may be tedious work, but it's an easy way to eliminate tenant candidates.
Checking Credit Scores
You need to check credit scores for every business and the people involved with them. A company's credit score tells you how financially responsible it's been over time.
There are multiple credit bureaus you can do this with. When you run a credit check, the business will have a PAYDEX score between 1 and 100. A score below 51 indicates a medium to high-risk borrower and tenant.
You should always do a tenant background check on company owners as well. If the business owner has a credit score under 700, you can't be sure that they can deal with financial issues that arise with their business.
Look at Business Reports
After you check credit scores, you need to look at financial reports and business plans. By reviewing financial statements and balance sheets, you can gain a clear picture of a company's current financial stability. A healthy cash flow statement means a business won't have any issues paying rent.
When you look at a company's business plan, you get a better sense of what they do and what their goals are. Knowing as much as you can about your tenant can help you figure out if the business has a strong future, which is what makes a great commercial tenant.
Get Help with Tenant Screening
The more thorough you are with tenant screening, the more sure you can be about a commercial tenant. Use these tips and you'll be able to find the best and brightest potential tenants in Montgomery, but if you want to be sure, hire a property management company to help.
PMI River Region is one of the top commercial property managers in Alabama. Serving both residential and commercial property owners, we can help you find the perfect long-term tenant for your vacancy. Contact us today to learn more about our services.