Commercial Real Estate Loan

Lenders like commercial real estate loans because they like the collateral. Most real estate loans are issued at a 75% or lesser LTV (loan-to-value). In some cases a borrower may obtain a 85% LTV with an SBA guaranteed note through the 504 loan program. You should never expect 100% financing when seeking a business real estate loan. Even hard money lenders will require you to have a sizable down payment to represent your skin in the game.

Commercial real estate loans can be amortized up to 30 years. In most cases your loan term will be shorter; however, the longer amortization will make your payments manageable. Lenders like to review the risk on commercial loans. Commercial loans typically stay on the books much longer than residential mortgages. For this reason lenders will write shorter terms with the hope to better manage the risk associated with your business and the real estate.

Commercial real estate can be owner occupied, investor, special use or special purpose, and general use property. LTV’s, interest rates and terms will vary depending on how your property is classified. General use property that is owner occupied is normally the most desirable to lenders. Appraisals and environmental studies are ordered to evaluate the risks associated with your specific properties. These third party reports can be expensive. Make sure your lender is committed to your loan before you spend the money to order theses reports. You will also want to have your lender order the reports in your behalf. Otherwise they may not accept the reports you ordered for fear they may be influenced or altered.

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