Commercial Loans Learning Center
Welcome to the commercial loan learning center. Use this as a page to learn about commercial loans and how to obtain financing.
What is a commercial loan? A commercial loan is any type of loan used for a commercial purpose. They are typically divided into business loans or commercial real estate mortgages.
Types of Commercial Loans
There are two different types of commercial loans—business loans and commercial real estate loans. At Commercial Loan Direct, we focus on commercial real estate loans, but if your needs also require business loans, we can certainly accommodate those requests.
Types of Commercial Loans for Real Estate
- Owner-Occupied – used for the purchase or refinance of commercial properties that house the borrower’s business.
- Investment Loans – used for the purchase or refinance of income-producing properties that have unrelated tenants paying rents.
Types of Owner-Occupied Commercial Loans
- Small Business Administration (SBA)
- CMBS (for larger or middle-market companies)
- Insurance (for larger or middle market companies)
- USDA (for properties in rural areas)
Types of Investment Commercial Loans
Commercial Loan Borrower Qualifications
- FICO score of at least 680
- Sponsor net worth equal to the loan amount (unless CMBS)
- Sponsor liquidity requirement varies by product
- No negative recent credit events (i.e. bankruptcies, foreclosures, short sales, judgments, liens, or collections).
For specific loan product underwriting and credit guidelines, please see the product page for the loan type that interests you or use our loan finder tool to narrow down potential loan products.
Use the tools and calculators below to see if you qualify for a commercial loan.
Commercial Mortgage FAQs
What is an example of a “commercial loan”?
A commercial loan is any type of loan used for a commercial purpose. They are typically divided into business loans or commercial real estate mortgages.
How do commercial loans work? How do I get commercial debt
Once you have identified the property to be purchased or refinanced, you apply for a commercial mortgage by submitting a financial package, which will allow us to know which loan products you qualify for. After revising your loan options and selecting which product you would like to move forward with, additional financial and legal information will be requested, third party reports will be ordered, title will be pulled, and escrow will be opened (if not already open in the situation of a purchase). Once all diligence items are completed, the loan will close and the borrower will make the monthly loan payments to the funding lender.
Where can I apply for a commercial mortgage?
We have simplified the commercial loan application process so you can get various loan options by submitting one streamlined application here.
What is a “term loan” in commercial real estate?
Sometimes called a “balloon” or “bullet” mortgage, the term of the loan is shorter than the amortization schedule, so the borrower makes payments as if it were a longer loan (i.e. 20-30 years), but the loan is actually due earlier (typically in 3-10 years). In term loans, the loan balance must be refinanced or paid off at loan maturity (i.e. the end of the term).
How much do I need for a commercial loan?
The down payment and post-closing liquidity requirements for a commercial mortgage depend on the property use and type. Minimum down payment for an owner-user property is typically least 10-15% and an investment property is 20-25%, but could be more depending on business or property cash flow or type. Minimum post-closing liquidity typically ranges anywhere from 6 months of mortgage payments up to 10% of total borrower debt, but averages at about 10% of the requested loan amount after the required down payment.
Is a SBA loan a commercial loan?
Yes. A SBA 7(a) loan is used as a business loan and a SBA 504 loan is used for the purchase of commercial real estate.
Can I use a business loan to pay personal debt
No, that would be a breach of the loan covenants and will trigger a default in your loan, which would allow the lender to immediately call the loan due.
Is it hard to get a commercial loan?
Commercial loans are based on business or property cash flow as well as personal credit. Although underwriting guidelines can change from one lender to the next, having a strong personal credit profile makes you eligible for better loans with more attractive terms.
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