Biz2Credit has helped thousands of small businesses secure a business loan for their operational needs.
Commercial Loans for your business needs
Generally, small business owners will apply for financing to purchase real estate, refinance a commercial real estate asset (such as a gas station, strip mall, industrial warehouse, office building, motel, hotel, etc.) or refinance a business with real estate. However, the complexity of these types of loans makes deal structuring difficult. Popular commercial loans include:
- Commercial Real Estate Loans
- Commercial Property Loans
- Commercial Construction Loans
Traditional lenders normally do not process commercial loans and non-traditional banks are not well known in the small business community. Wholesale banks specialize in funding the larger real estate deals and mainly work with brokers on loans above $1 million. On deals including goodwill with a real estate component, small businesses should apply for an SBA loan. Unfortunately, guarantee fees range anywhere from 1 percent to 3 percent of the loan amount.
Forbes recently reported that the strong commercial loan demand has resulted in an increase in the loan portfolio growth at banks, especially commercial real estate loans, commercial construction loans and commercial property loans.
Meanwhile, big banks are now approving more than 20 percent of their small business loan requests and small banks are approving more than half of their loan requests, according to the Biz2Credit Small Business Lending for November 2014.
Commercial Loan Packaging
Using income expense figures and the rent of the property, business owners can decide whether the deal should be full documentation or stated. Full documentation means that the income of the property supports the mortgage payment. Typically, institutions lend at lower rates when borrowers present their case with full documentation. With stated deals, lenders judge the case generally by the value of the property. In this case interest rates are higher.
Commercial Loan Paperwork
Commercial lenders issue a provisional term sheet including an appraisal order form, environmental appraisal forms and a 1003 form. To qualify for a commercial real estate or a commercial construction loan, the borrower must provide personal information including estimates of assets and liabilities.
An MAI (Members of Appraiser Institute) approved appraiser conducts the appraisal for commercial property loans. For certain properties like gas stations and industrial warehouses, owners must schedule an additional environmental appraisal to check for leakages and investigate past violations before qualifying for a commercial loan.
In order to close a commercial real estate loan, lenders conduct a title search of the property to check for any existing liens.
Overall, the process can take around four to five weeks where the various required appraisals can cost $1,200 to $5,000. Closing costs range from 1 percent to 2 percent of the commercial loan amount.