A commercial real estate loan is a loan for property used for commercial purposes. It is used solely for business purposes. If you are planning to purchase a new or existing commercial property, then this loan is beneficial for you. Businesses take commercial real estate loans, not individuals.
How does commercial real estate loan works?
Commercial real estate loans are also known as mortgage loans and are secured by liens. Now you might be wondering: What is a lien?
A lien is a legal right that the owner of the commercial property gives to the creditor. This serves as a guarantee for the repayment of the loan. If the owner fails to make the repayment, then that credit is enough to seize the asset that is secured by the lien. In short, the lien is only used as a protection for the lender.
Loan repayment schedule:
There are two types of commercial real estate loans known as intermediate loans and long-term loans. Intermediate loans typically last for three years or less. Whereas long term loans last for five to twenty years.
The commercial loan ranges from five to twenty years. The amortization period for the commercial loan is longer than the term of the loan. For example, you pay the debt in regular installment for over a period of 30 years.
The interest rate of the commercial real estate loan depends on the type of your business and your credit history.
How to get a commercial real estate loan?
Commercial real estate loans come with tough eligibility criteria. As you are going to apply the loan to purchase a huge commercial property, it will require lengthy paperwork. The lenders will not only look at your business history but also the property you want to purchase from that loan.
The following things are necessary to qualify for the commercial real estate loan.
Your credit score:
The most important factor that lenders will look for is your credit score. The commercial real estate loans depend highly on it. The lenders will look at your track record and whether you can pay back the debt. For this purpose, they will ask you to provide your personal as well as business credit score.
Your time in business:
Another factor that determines whether you are eligible for a commercial real estate loan is your time in business. If your business is newly established, the lender will not consider approving your loan. But if your business is well established or you are in the field for more than two years, then you can qualify for the loan.
Furthermore, the lender will also look at your previous experience in the business field and management. Therefore, if you have renovated commercial space in the past, then you can easily qualify for the loan.
Debt Service Coverage Ratio:
The lenders will look at your company’s debt service coverage ratio before approving your loan. It is calculated by dividing your annual income with the loan payments. If your business has a debt coverage ratio of more than 1.2, then lenders will approve your loan.
We have partnered with one of the best Commercial Real Estate lender in the Business: 24hr Fast Funding Capital.
Below are their requirements:
- Loan Amount: $75k-$5MM
- Term: 30- year fully amortized loan.
- Credit Requirement: 650 Minimum Fico
- Rates: 6.99%- 9.49%
- Down Payment: 20%-25%
You can directly apply for commercial real Estate Loan on Here: Commercial Real Estate Loan Application