How Commercial Real Estate Loans Work

When your business needs to grow, you will be entering the commercial real estate market. Part of the process, once you have an idea of the property you need, is to secure a commercial real estate loan. It may sound easy but it’s not quite the same as obtaining a mortgage for your home.

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Commercial real estate loans are provided to businesses, not individuals. Most commercial lenders will want to see some sort of established business entity, such as an LLC or corporation. Although it may be possible to get pre-approved for a commercial real estate loan, it is normally the practice for the lender to secure their loan with a lien on the property, which makes pre-approval more difficult because there isn’t a property to secure.

Commercial loans also come in different varieties, including amortized and balloon loans. Amortized loans are structured the same as your home mortgage, with the loan paid off in regular payments. A balloon loan is different, because during the loan period you may be paying primarily interest on the loan, with a final larger payment to pay off the principal. Commercial loans are also based on different terms than a residential mortgage, with loan terms of 5 to 7 years being typical.

The interest rates on commercial loans are based on your business health, the income you receive from it, and your credit rating when dealing with conventional lenders. Expect interest rates to be higher than for a residential mortgage. There will also be upfront fees required to secure the loan.

This is where Shop Commercial Mortgage is different from a conventional lender. We can offer hard or private money commercial loans with similar loan durations as conventional lenders, but without the months of waiting and without the focus on your credit rating. We can provide commercial real estate loans the banks will turn down. We offer loans from $50K to $10M with up to 75% LTV. If you need to grow your business and have credit ratings that make it difficult to obtain conventional real estate financing, call Shop Commercial Mortgage today for a consultation.

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