How to Qualify for a Commercial Real Estate Loan

How to Qualify for a Commercial Real Estate Loan

A commercial real estate loan is used by individuals and businesses who want to finance the purchase or renovation of a property that will be used for income-producing purposes. Applicable properties include office buildings, industrial buildings, warehouses, restaurants, retail properties, shopping centers, medical facilities, entertainment facilities, apartment buildings, and hotels.  

Characteristics of a Commercial Real Estate Loan 

A commercial real estate loan typically features an interest rate starting at about 3.5 percent, a down payment of at least 25 percent, and loan repayment terms of five to ten years. 

Types of Commercial Real Estate Loans 

The types of commercial real estate loans include: 

A traditional long-term, or so-called “permanent” loan.  This is essentially a mortgage on a commercial property, and one of these can offer a fixed or variable interest rate and a longer repayment period compared to residential mortgage loans. 

An SBA loan where the SBA provides a guarantee for the loan through an approved commercial lender. The SBA 7(a) loan is the most common type of loan used for commercial real estate purchases. 

So-called “hard money” loans. These are offered by individuals or private companies, based on the value of the property. However, the interest rate on one of these loans is typically much higher than traditional commercial loans. The repayment period is often much shorter too. 

A bridge loan is a loan offered by financial institutions used as a short-term solution between more permanent financing. 

How to Qualify for a Commercial Real Estate Loan 

Qualifying factors for a commercial real estate loan include: 

A good credit score. 

A down payment of 25 to 30 percent. 

A debt-to-service ratio of 1.25 or better shows that you have adequate income to make the monthly loan payments. 

Business tenure of two or more years. 

Financial documentation. 

Seek Experienced Financial Assistance 

Contact TCF Capital for a wide range of financing solutions. Specifically tailored to your needs and to meet your commercial financing requirements.