| COMMERCIAL LOANS |
Commercial mortgage loans are used when purchasing structures such as office buildings, apartment complexes, health care facilities and retail outlets. Whether it’s a high-rise tower or a family-owned restaurant, buyers typically need additional funding to complete the transaction. Commercial mortgages are what they pursue.
Similar in many ways to residential loans, commercial mortgages require far more paperwork. Both types of loan require that the properties being purchased undergo a thorough appraisal. Both require collateral to secure the loan and protect the lender against default. |
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| Commercial Mortgage Rates |
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Rate Estimates
(As of 9/7/2005) |
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Anchored Retail |
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Apartment |
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Auto Services |
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Condo-conversion |
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Congregate Care |
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Convenience Store |
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Golf Course |
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Industrial |
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Lodging |
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Medical |
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Mini-storage |
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Mixed Use |
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Mobile Home Park |
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Office |
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Portfolio |
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Religious Facility |
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Research & Development |
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Restaurant |
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Special Purpose |
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Strip Retail |
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| 5 Year Fixed Rate
(Index: 5 yr treasury, 3.89%) |
| 5.4% |
5.4% |
5.6% |
5.8% |
| 5.3% |
5.3% |
5.5% |
5.7% |
| 6.0% |
6.1% |
6.3% |
NA |
| 5.4% |
5.4% |
5.6% |
5.8% |
| 5.5% |
5.5% |
5.7% |
5.9% |
| 6.1% |
6.2% |
6.4% |
NA |
| 6.1% |
6.1% |
6.3% |
6.5% |
| 5.4% |
5.4% |
5.6% |
5.8% |
| 6.2% |
6.3% |
6.6% |
NA |
| 5.5% |
5.5% |
5.7% |
5.9% |
| 5.6% |
5.7% |
5.9% |
NA |
| 5.6% |
5.7% |
5.9% |
NA |
| 5.4% |
5.4% |
5.6% |
5.8% |
| 5.5% |
5.5% |
5.7% |
5.9% |
| 5.4% |
5.4% |
5.6% |
5.8% |
| 6.9% |
7.0% |
7.2% |
NA |
| 5.4% |
5.4% |
5.6% |
5.8% |
| 6.4% |
6.5% |
6.7% |
NA |
| 6.4% |
6.7% |
NA |
NA |
| 5.8% |
5.8% |
6.0% |
6.2% |
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| 3 Month Adjustable Rate
(Index: 3 MO LIBOR, 4.44%) |
| 6.0% |
6.0% |
6.3% |
6.4% |
| 5.9% |
5.9% |
6.2% |
6.3% |
| 6.6% |
6.7% |
7.0% |
NA |
| 6.0% |
6.0% |
6.3% |
6.4% |
| 6.1% |
6.1% |
6.4% |
6.5% |
| 6.7% |
6.8% |
7.1% |
NA |
| 6.7% |
6.7% |
7.0% |
7.1% |
| 6.0% |
6.0% |
6.3% |
6.4% |
| 6.8% |
7.0% |
7.2% |
NA |
| 6.1% |
6.1% |
6.4% |
6.5% |
| 6.3% |
6.4% |
6.6% |
NA |
| 6.3% |
6.4% |
6.6% |
NA |
| 6.0% |
6.0% |
6.3% |
6.4% |
| 6.1% |
6.1% |
6.4% |
6.5% |
| 6.0% |
6.0% |
6.3% |
6.4% |
| 7.5% |
7.6% |
7.9% |
NA |
| 6.0% |
6.0% |
6.3% |
6.4% |
| 7.0% |
7.1% |
7.4% |
NA |
| 7.0% |
7.3% |
NA |
NA |
| 6.4% |
6.4% |
6.7% |
6.8% |
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| What Are the Keys To Closing a Commercial Real Estate Loan? |
There are several factors involved in the successful closing of a commercial real estate loan. Among them: |
Information
The more complete the "picture" is of all parties involved in the deal, the more quickly the loan can be approved. |
Speed
The longer a loan application is in the works, the greater the chance things will go bad.
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Down Payment
A sizeable down payment generates a lot of interest on the part of a lender. It signals that you are serious in acquiring the loan. |
Flexibility
These are some of the factors that cause lenders to change their requirements:
Programs change, lenders drop out, collateral is not as valuable as expected. The buyer and seller must be willing to accept and roll with the set backs that can occur in the pursuit of the loan. |
Equity
The major key to any loan is equity in the collateral. If there is enough equity almost any hurdle can be overcome. |
Commercial Loan Checklist
The following list will help you identify the types of information a banker will need to make an informed decision about your business:
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 Three years income tax and financial statements
Year-to-date profit & loss and balance statement
Personal finance statements
Projected cash flow statements for next 12 months
Pro forma for next 12 months / length of loan
Federal and state tax information
Collateral sheet
Well written business plan |
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Commercial Loan 101
Below you will find some information that should be general enough for all of the different types of credit. To get specific information about the avenues open to you as a small business owner follow the links at the end. |
| Read more>> |
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Commercial Lending Ratio
The bulk of the energy spent "processing" a loan is merely an attempt to verify the numbers that go into the numerator and denominator of the above 3 ratios. |
| Read more>> |
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How Commercial Loan Processing Works
When you submit your business loan application, it may seem like it disappears into a black hole. But understanding how the commercial loan processing system works can help reduce your anxiety while you wait for approval. |
| Read more>> |
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A good relationship with the right banker can pay dividends
Sooner or later comes a time in the life of most small businesses when they need a commercial loan - to acquire a new vehicle, production machinery, equipment and supplies, or just plain old working capital to tide things over until a big contract pays off. |
| Read more>> |
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How much can I borrow? |
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As a general rule the most you can borrow against investment and commercial property is 80%. The primary exception is for owner-occupied business properties that obtain financing through an SBA (Small Business Administration) loan program. Some lenders and programs limit maximum Loan-to-Value (LTV) to as low as 60%-70%. "Lite-Doc" programs may limit LTV to as low as 50%-70%. LTV varies by property type, location, condition, etc. How much you can borrow depends on the value of the property and the income stream that it can generate. Lenders want some cushion built in to the loan for both the value and the income-stream. Therefore they will lend less than the full value of the property and will require that the loan payments be less than the income the property is capable of generating. |
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How long does it take to close a loan? |
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We can generally give you an assessment of your situation in our first conversation. You can get "Pre-Qualified" as quickly as 2-5 days. For "Lite-Doc" programs, approval and closing can take place within 3-4 weeks. Full-documentation loans that require third party reports such as appraisals and environmental inspections usually take between 30-60 days to close. Providing us with complete information and documentation early-on can speed the process considerably. |
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Why is it valuable to apply for a higher loan-to-value (LTV) amount? |
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Applying for a loan with a higher LTV amount allows you to better leverage your money. The return on equity you receive from your investment will be higher when you put less money down. Less money out-of-pocket means more cash on hand to invest in your business or property. |
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