What are commercial real estate loans?

Commercial Real Estate Loans (CRE Loans) are a popular way for businesses to finance the purchase, renovation, or expansion of a commercial property such as these Top US Real Estate Franchises. We discuss some of the pros and cons of commercial loans, the best lenders, loan requirements and more. Let’s start!

What is a commercial real estate loan?

Commercial real estate loans are mortgages used to purchase, refinance, or renovate commercial real estate. The terms of these loans can vary significantly. Commercial real estate financing can be obtained from many sources, including traditional banks, credit unions, life insurance companies, and private investors.

Is a commercial real estate loan right for your small business?

CRE loans can be great for small business owners, but it is important to understand the pros and cons of taking out such a loan before making any decisions. The Small Business Administration (SBA) provides useful information on its website about what to look for when applying for a commercial loan. Before you apply for a loan, find out how these 5 real estate investment mistakes can hurt your business! Learn why.

Benefits of Commercial Real Estate Loans

Commercial real estate loans can provide business owners with many benefits, including the following five:

Flexibility in Repayment Terms – You can typically choose from a variety of repayment options, including interest-only payments, balloon payments, and more. Low Interest Rate – Commercial real estate loans often have lower interest rates than other types of loans, such as business credit cards or personal loans for better monthly payments. Possible Tax Benefits – The interest paid on a commercial loan is often tax deductible. This can be a valuable benefit, especially for businesses struggling to make ends meet. This can give you the financial breathing room you need to grow your commercial real estate business. Builds Business Credit – Paying off a CRE loan on time will help you build business credit, which can be useful if you ever need to apply for a business loan in the future.

Disadvantages of Commercial Real Estate Loans

There are also some potential drawbacks to taking out a CRE loan, including the following four reasons:

Fees and Closing Costs – Commercial real estate loans often have varying fees and closing costs that can add up. For example, hard money loans can be more expensive than traditional loans. Loan Minimums – Some lenders have minimum loan amounts, which can range from $100,000 to $1 million or more. Deposit requirements can also be higher, typically 20% to 30% of the property’s purchase price. Higher Interest Rates and DSCR – Interest rates on commercial loans are often higher than those on home loans. Your debt service coverage ratio (DSCR) will also be considered, which measures your ability to repay a loan using existing cash flow.

Best Commercial Real Estate Lenders in 2022

Here is a list of the best commercial lenders to get SBA loans in 2022:

1. American Bank

US Bank offers several types of commercial loans with longer maturities up to 25 years, but has higher credit requirements than other lenders on this list.

2. KeyBank

KeyBank Real Estate Capital provides financing for both commercial and multi-family homes through various solutions, such as commercially supported mortgage security markets.

3. Wells Fargo

Wells Fargo is an excellent choice for borrowers seeking a conventional bank mortgage loan with financing of up to $1 million for five and ten years, and up to 20 years for larger projects.


With over 14,000 loans, CBRE Loan Services provides expert loan services tailored to their client’s specific needs. They have offices in the US, Europe and Asia Pacific.

5. JPMorgan Chase

JPMorgan offers commercial loans of up to $15 million. However, for multi-family projects, they will borrow up to $25 million.

6. Walker & Dunlop

With 39 offices nationwide and more than 1,300 employees, Walker & Dunlop has closed more than $260 billion in business since 2011. They offer many available financing options.

7. SmartBiz

SmartBiz takes the complicated and long process of applying for SBA loans and makes them more manageable. Financing on an SBA loan of up to $5 million, 25 years with a loan-to-value of up to 90% is available.

8. Northeast Shore

Northeast Bank offers loans, including SBA and USDA loans, in many industries such as hotels, gas stations and self-storage.

9. Berkadia

Berkadia creates long-term solutions that are specifically tailored to what best suits your unique situation.

Commercial Real Estate Loan Requirements

Here are some key requirements for getting a commercial real estate loan:

Strong credit score: To qualify for a CRE loan, you need a strong credit score. Lenders typically look for a credit score of 680 or higher. Solid business plan: Lenders also want a well thought out business plan. This should include information about your expected income, expenses and how you plan to use the proceeds of the loan. Collateral: Most lenders require some form of collateral, such as a mortgage on your property or a personal guarantee. Down payment: you usually have to make a down payment of 20-30% on a CRE loan. An experienced team: It is also important to have an experienced team, which includes a real estate agent, lawyer and accountant.

How to get a commercial real estate loan

With a little preparation and knowledge, you’ll be well on your way to getting the financing you need. Follow these steps:

Determine how much to borrow: This will help you narrow down your list of potential lenders. Compare interest rates and terms: Business credit scores, collateral, and down payments all play a role in the interest rate offered to you. the right lender: The loan-to-value ratio, fees and customer service should all be considered when choosing a lender. Have your paperwork in order: This includes your financial statements, business plan, and other documentation the lender will need. Negotiate loan terms: Once you’ve chosen a lender, it’s time to negotiate loan terms. Closing the Loan: Once you’ve reached an agreement with the lender, it’s time to close the loan and get started on your business expansion.

Do commercial banks offer real estate loans?

Yes, commercial banks offer real estate loans. Commercial banks generally have more experience with real estate loans than other lenders, and may be more willing to work with you on the terms of the loan.

What credit score is needed for a commercial loan?

To qualify for a commercial real estate loan, you typically need a credit score of 680 or higher. Lenders want to make sure you are a safe bet before they lend you money.

What is a good interest rate on commercial real estate loans?

Commercial real estate loans currently have an interest rate of 2.2% to 18%. The interest rates on these loans are determined by the borrower’s credit score, the amount of money being borrowed, and the value of the property used as collateral for the loan.

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This post What are commercial real estate loans? was original published at “https://smallbiztrends.com/2022/06/commercial-real-estate-loans.html”

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