The right commercial loan can help you make the most out of your next investment.
You may want to buy one of several kinds of commercial properties. For example, you may want to open a new facility.
You may even want to expand an existing facility. Alternatively, you may want to build an income with rental properties. Typically, you’d finance these kinds of transactions with a commercial real estate loan.
Learn more about how to get the best commercial real estate loan by continuing to read.
As the name implies, commercial real estate loans back investments in commercial real estate. However, a commercial real estate loan isn’t a blanket instrument that covers all commercial lending transactions. Accordingly, you’ll need to find the best commercial real estate loans for your portfolio.
Commercial banking loans are specific depending on occupancy, ownership, building type, etcetera. Accordingly, you’ll need to find the best commercial real estate loan banks that meet your needs.
In some instances, you can use a commercial real estate loan to improve your existing business. In that case, you’d use your majority ownership of the property to secure the loan.
You can still lease out part of the property. However, you must use at least 51% of the property for your business.
Alternatively, you may want to lease out more than 50% of your space. In that case, you’ll need another kind of commercial loan.
This kind of borrowing is more speculative. For that reason, this kind of commercial loan falls into a different class.
With this in mind, there are different kinds of commercial loans for various uses. For example, you may need to buy an office building to support your company’s administrative functions. Alternatively, you may need to expand or relocate your current retail store with a commercial refinance loan. You may also secure a commercial loan to buy a warehouse to hold your inventory. You might even secure a commercial loan to renovate a hotel that you plan to own and operate.
A commercial real estate loan is very different from a consumer loan. Commercial loans have additional requirements for collateralization and underwriting. They also have different rates, terms, and other loan characteristics.
Also, it’s easy for bankers to sell consumer loans to other financial institutions. In this way, lenders reduce their risk exposure.
However, there are fewer programs for commercial loans that enable lenders to mitigate risk in this way. For this reason, many commercial loan lenders will hold a loan after issuing funds. They don’t have the option to sell the loan to investors.
Accordingly, lenders typically assume more risk when underwriting a commercial loan. They must bear the loss if a borrower cannot repay the loan. Resultantly, even the best banks for commercial real estate loans are much more risk-averse.
For example, a commercial lender may require a higher credit score. They may also need a larger down payment.
Also, you cannot purchase mortgage insurance for a commercial loan. For this reason, a commercial lender may also require a higher income level. The lender may again charge higher interest rates.
Furthermore, the terms of a commercial loan are typically shorter compared to a home mortgage loan. For example, most home mortgages have 30-year terms.
Meanwhile, a commercial loan usually has a duration of 5 to 10 years. For this reason, it’s highly beneficial to find the best bank loans for commercial real estate.
There are several types of loans that you can use to finance commercial real estate. Each option is different. You’ll need to sort through many details to find the best bank loans for your needs. For example, different commercial loan types have different rates and terms. They also have varying eligibility requirements and application processes.
Before you apply for a commercial loan, you’ll need to choose the right one for your use. In this regard, you’ll have several options to consider.
For instance, you may consider a bank term loan. This kind of commercial loan works well for borrowers with an established banking relationship.
Alternatively, you may consider a commercial loan backed by the Small Business Administration (SBA). Typically, you’d pursue an SBA loan if you cannot secure a commercial loan from a bank.
You can also apply for a commercial line of credit. This kind of commercial real estate instrument is for business owners who own a property. It allows you to borrow against the equity of your commercial real estate.
Finally, you may consider a portfolio loan. A portfolio loan is a kind of commercial loan for funding commercial real estate investment for multiple locations.
You’ll need to choose a lender to secure your commercial real estate loan. There are many types of lenders available; you’ll need to find the most suitable for the kind of property, occupancy. Not all loans are created equal—real estate loan providers for your unique circumstances.
You must find a commercial lender that offers the kind of loan that you need. However, the lender that you choose must also offer rates that you can afford. Furthermore, they must have qualification requirements that you can meet.
For these reasons, there are several things you’ll need to consider as you search for a commercial lender. For instance, you’ll need to consider available loan options.
You’ll also need to assess origination fees. Furthermore, you’ll need to consider starting interest rates.
Also, you’ll need to assess documentation requirements. It would help if you also considered how many years of operation lenders require for you to qualify for a loan.
Still, there are other points that you must assess as you research commercial lenders. For example, you must evaluate whether a commercial lender requires a personal guarantee. Most do.
It’s also a good idea to consider how long it takes to receive funding. If necessary, you may also need to consider whether a lender provides commercial loans for less-than-optimal credit.
Once you’ve narrowed down your choices, you’ll need to assess lenders’ reputations. You can visit the Better Business Bureau’s website to evaluate a lender’s standing. You’ll want to take your time with the reviews to gain a thorough understanding of what it’s like to work with a potential lender.
You need to take different steps to qualify for a commercial loan than if you were applying for a home mortgage. In this instance, you’re borrowing funds to operate a business.
With this in mind, you’re going to pay back the loan using the money you generate from the enterprise. Lenders want to know that the profits from your business can cover the loan payments.
For this reason, lenders will examine a few points when considering whether to provide you with a commercial loan. For example, they’ll want to know that the value of the property adequately secures the loan.
You’ll need to have 25% to 30% equity in the property. You’ll most likely also need to make a
25% or more down payment.
Commercial lenders also want to ensure that you have a sufficient income ratio from the property to expenses. Sufficient income reassures lenders that you can make your monthly loan payments.
Finally, a commercial lender will also want to check your personal credit history.
Different commercial lenders require varying credit scores. However, most need a credit score of between 660 and 680 before they’ll consider funding your loan.
As you can imagine, it’s a lot of work researching commercial lenders. For this reason, many entrepreneurs consider working with a commercial mortgage broker.
However, some business owners worry that it will cost too much to hire a broker rather than going directly to a lender. Unfortunately, this is a common misconception.
Working with a loan originator to secure a commercial loan can save you money in many ways. An experienced originator can help you achieve your financial goals and make the most of new
opportunities. For this reason, it’s worth considering the value that a commercial mortgage broker can provide.
Choosing a commercial lender is straightforward— in theory. However, you’d have to sort through many lenders to find the right commercial loan for your needs.
There are many kinds of property and loan types. Also, there are many kinds of borrowing needs. A single lender cannot offer every kind of commercial loan. For these reasons, it may take considerable time to find the right kind of commercial lender.
However, an experienced mortgage broker maintains relationships with many kinds of lenders. They can provide you with a wide variety of lending options.
Top commercial loan brokers can give you access to hundreds of lending choices. They can even help you to find the loan options that serve your best interests.
Now you know more about how to get the best commercial real estate loan. What you need now is an experienced loan originator that can help you meet your objectives.
Blake Mortgage has served residential and commercial loan needs in Greater Phoenix for nearly
20 years. We can help you to locate comprehensive, customized lending solutions quickly.
With Blake Mortgage, you can count on a personalized, detailed, and client-focused experience. Furthermore, we can help you to finance even the most complicated commercial transactions. Contact Blake Mortgage today at (480) 699-1055 or connect with us online to get started finding your next commercial loan.