22 June Commercial Real Estate Loans

Commercial real estate (CRE) is an income-generating real estate that is employed for business purposes. Examples are office buildings, retail stores, warehouses, self-storage buildings, land developments, medical facilities, industrial and warehouse facilities, automotive repair shops, etc.

Hence, a commercial real estate loan is a type of commercial loan of which the mortgage acquired is secured by a lien on a commercial property rather than a residential property. Depending on the property and business, there are different types of commercial real estate loans housed under loans for businesses, loans for investment, or loans for development. Below are the primary types:

  • Purchase loan
  • Mortgage Refinancing
  • Bridge Loan
  • Cash-Out loan
  • Hard-Money loan
  • Construction loan
  • Fix-and-Flip loan
  • Multi-family loan

 

HOW TO QUALIFY FOR A COMMERCIAL REAL ESTATE LOAN

This will largely depend on the kind of loan you seek. However, some factors will help you improve your chances of getting an affordable loan regardless of where you apply:

  • Credit Score: The higher it is, the better your chances of approval in securing a CRE loan.
  • Real Estate Collateral Value: As you know, real estate loans are ‘asset-based’ which means that you should make sure your property itself is excellent collateral on the loan you seek
  • The longer your business has been around, the better your chances.
  • Debt Service Coverage Ratio: This is the calculation of your net annual income, divided by your loan payments. It sure shows if you’re capable of making your regular payments monthly.

Get all these in place, and you can easily qualify for a CRE loan.

It is essential that you critically understand your options and then work to get both the right and best CRE loan for your business’s nature as it is crucial for the success of your business.