Commercial real estate (CRE) loans make accomplishing your dreams of owning a commercial real estate property achievable. While many people have a basic understanding of residential loans, CRE loans are not as widely discussed. A CRE loan can be used to purchase or renovate a commercial real estate property. Most lenders require that the property is owner-occupied, which means your business must occupy at least 51% of the building.
Where to Get a CRE Loan
There are multiple sources to obtain a CRE loan, so strive to find one that best suits you. Banks provide good rates and are especially convenient if you are an existing bank customer. However, they require extensive documentation and tend to only lend to those with good or excellent credit. There are also non-bank finance companies that provide real estate loans to small businesses. This is a faster option but comes with a higher interest rate. SBA 504 loans are another option. They consist of 50% of the loan from a bank, 40% from another Certified Development company, and the last 10% from you. Hard-money lenders are short-term loans determined by the value of the property. While these are easier to qualify for, they have higher interest rates. There are a variety of routes to get approved for a CRE loan, as these are just some of the CRE lenders.
Applying for your CRE Loan
The first step in applying for your CRE loan is to prepare the necessary documentation. This includes documents that show your assets, debts, income, credit profile, and business plan. Like residential loans, lenders will examine your credit to determine whether you qualify. However, CRE loans go a step further and also evaluate your FICO Small Business Score. This is a three-digit score ranging from 0 to 300. A score around or above 200 is considered good. Likewise, lenders will scrutinize your business finances to ensure your business has the cash flow to repay the loan. To increase your chances of getting approved, pay off existing debt, add a cosigner, or pledge additional collateral.
Whether you’re hoping to purchase a property for your business or in need of expanding your company, a CRE loan can make it possible! Need help? Contact us and we can guide you!