A commercial mortgage (aka: Commercial Loan) is a loan taken out on commercial real estate. The real estate is the collateral. The borrower is a company or business. Rates are based on commercial lending which is higher than that is residential mortgage rates; due to the added risk. Commercial mortgages take longer to fund with times ranging from 60 days up to a year.
What is considered a Commercial Property?
- Mufti-family residential, typically 4 units and up
- Storefront or Storefront with Apartments
- Residential Commercial (Mixed) building
- Commercial Plaza or Retail Plaza
- Office Building
- Industrial Building
- Farm Land
- Hotel or Motel
It can be difficult to compare rates on commercial mortgages, as they are not advertised and lending criteria for different property types, and terms can vary. For commercial mortgages, its advisable to procure the services of a Mortgage Broker/Agent to ensure all options are reviewed. The Broker can also directly connect you with the lender most likely to provide the mortgage and with fair terms.
Lenders look for financial maturity in a borrower. This is done by way of good credit and proof of a strong down, which is typically 25-35% down. There may be opportunity to add a second mortgage if the borrower does not have the full down payment required; however, this is usually done with a private lender.
What will You Need For a Commercial Mortgage?
Personal and Business Credit Report
Income Tax Returns
Business licenses and Registrations
Articles of Incorporation
If applicable, your Franchise Agreement or any Lease Agreements
What Will the Lender Ask Me About My Commercial Mortgage Application?
Why are you applying for this loan?
How will the loan proceeds be used?
What assets need to be purchased, and who are your suppliers?
What other business debt do you have and who are your creditors?
Who are the members of your management team?