Best Commercial Real Estate Loans: Mortgages and loans are necessary financial tools that can profoundly impact your business’s financial decisions. The loan used to build your dream home or purchase the limited-edition Cadillac you have always wanted. A business loan is an excellent way for business owners to access this vital financial tool.
There are many types and sizes of business loans. The standard term loan is to purchase office equipment, train new employees or provide capital.
But what if you need a loan to finance your real estate business? It could be anything from leasing new offices to renovating your existing office space or even a complete company overhaul. Your standard business loan won’t cut it in this case. A commercial real estate loan is a better, more solid option.
CRE loans, specifically designed to finance commercial real estate and income-producing properties, are mortgages that can be used only for business purposes. Like traditional mortgages, such as home mortgages for self-employed, CRE lending is also facilitated by banks and other independent lenders.
There are many types and varieties of CRE loans. While some lenders offer coverage for specific services, such as flip Funding, or online services, others provide general coverage. Their rates and terms will vary depending on the services they offer. Some may be right for you, while others could be disastrous. It is essential to make an informed decision when looking for CRE loans to finance your real estate investment.
Commercial Lending USA has compiled a list of the top commercial real estate loan lenders across various categories to help reduce the stress of searching through a lengthy list of lenders.
Best Overall: Lendio
options. Lendio is a good option. Lendio’s wide range of loan options and simplified borrower experience are two of its strengths. They are the best CRE lender on the open market. Lendio doesn’t operate as a traditional lender. It’s more of a lending marketplace that has over 75 partners. The platform allows you to access a variety of loan offers based on your financial situation.
Lendio allows you to submit one application or loan proposal via the app. The proprietary algorithm matches your application with multiple lenders based on your financial needs. Your designated funding manager will help you find the best lender for your company and make the process easier. This process applies to all types of loans. You can compare rates and find the best-matching loan for you, no matter what kind of loan (CRE loans or other), so you can make an informed decision.
Lendio offers a wide variety of funding options that allow business owners to obtain loan approvals faster. The application process is free and you receive the same rates as the lender. Its best feature is the ability to compare rates and offers from different lenders. Makes loan shopping much easier and quicker.
Lendio does have its downsides. It may take longer to fund than other lenders, as it takes at least two days to get you the best deals. However, its benefits outweigh its drawbacks. If you’re looking to secure a CRE loan, Lendio is still a great lender.
Bank of America is the best bank for small commercial real estate loans.
Large-volume commercial loans are the most common. Regular payouts of seven figures are expected. However, the Bank of America’s (BoA) real estate loan is a bit of a surprise.
You can obtain a CRE loan for as low as $25,000 and still get the same rates and terms that real estate loans offer, even those of enormous size. You may think that this sounds too good to be true. At least partially. BoA’s offers are tempting, but it takes work to qualify for a real-estate loan. The lender has strict requirements to approve loan applications.
BoA, for instance, requires a higher credit score (around 600s), more significant revenue, and a more extended business history than other lenders. That means the loan might not suit startups and businesses with low credit scores. BoA is a traditional bank so you cannot apply online for most of their loans. Makes it challenging to apply for loans online and leads to a slower funding process.
However, let’s say you’re qualified and not trying to rush. To transform your business, it’s a brilliant idea to approach the BoA for a loan in CRE.
Flip Funding is the best for hard money loans.
A suitable hard money lender is crucial for realtors looking to flip or remodel a property. Flip Funding is the best lender for those looking to rehab or reverses a parcel due to its extensive commercial hard money loan portfolio and zero prepayment penalty.
Flip Funding offers a range of hard money loans. The line of credit is for repeat rehabbers. It’s a rehab-only loan that can finance repairs to the borrower’s home and a fix-and-flip loan for those looking to make a profit. Flip Funding keeps you from losing out on great deals due to delayed closing. This lender has a proven track record of closing deals quickly.
Before you apply for hard money loans, make sure that you have the plan to repay your Flip Funding loan or refinance it after the loan term ends.
Best for SBA Real Estate Loans: SmartBiz
SmartBiz is a great place to start if you want an SBA loan (government-backed). SmartBiz, similar to Lendio is a lending platform for business loans. The venue, however, is different from Lendio. It’s solely focused on aggregating available SBA loan offers to the SBA loan program. SmartBiz has a lower rate of interest than traditional banks or online lenders due to the SBA Guarantee.
The platform also allows you to connect with various lenders, increasing your chances of getting an SBA loan quickly and making the application process more manageable. SmartBiz has stricter requirements than other online lenders to be eligible for an SBA loan, which is not accessible for businesses with poor credit.
SmartBiz has a few drawbacks. The application process can take up to a week, which is relatively slow. SmartBiz offers a faster way to get an SBA loan than traditional SBA lenders. However, you won’t have to wait as long with SmartBiz. SmartBiz is a quick and easy way to apply for CRE SBA loans.
PNC is the best for owner-occupied commercial loans
Let’s say you prefer to complete a simple project in real estate instead of tackling a large project such as buying an investment property. Perhaps it is renovating your photography studio, or retrofitting your office.
What are the Best Commercial Real Estate Loans?
Finding the right CRE loan company cannot be accessible when there are so many. It is possible to make better decisions by focusing on key features. These are the key features you should look for when applying for CRE loans.
Rates
Before you choose a CRE lender, the loan rate should be one of your most important considerations. There are two types of rates: fixed and variable. A fixed rate is usually more efficient. While doing your research, make sure you note the rate type. After narrowing down your choices, it’s time to compare rates offered by different lenders. The best CRE lender should offer the highest rate.
Terms
It is essential to understand the terms of your loan, particularly regarding length and repayment time. The loan term must correspond with the purpose. If you are pursuing a long-term goal, you might prefer a lender with a longer repayment term than one with a shorter repayment term. Look out for lenders who offer the best times.
Lending purpose
CRE loan providers don’t have to be a master of all trades. Many lenders specialize in one area. Some lenders can only provide small-sized loans for real estate, while others may be SBA loan providers. It is essential to ensure that the loan you get matches your goals. Only apply for an SBA loan if you want to flip a home. Instead, it would help if you looked for flip lenders.
Customer service
It is hard to overstate the importance of customer service. This criterion is just as important as any other. A good customer service record can make a difference in the loan application, refinance, and repayment process. Expert guidance will help you avoid common pitfalls and errors during your loan application process. Do your research. The more customer service is, the better and more efficient a company will be.
How to get approved for a commercial real estate loan
You may not be approved for a CRE loan, as with any other type of loan or credit request. A request does not guarantee approval. However, steps you can take will increase your chances of being approved. These are some of the steps:
Demonstrate profitability
Good credit scores are a result of solid profitability. Your loan application can be made successful if your company finances are in order. Your bank or lender will assess your ability to repay your loan terms. Proving your ability to repay the loan terms is called profitability.
Prepare relevant documentation
Imagine calling a plumber to fix a leaking sink and having him show up at your door empty-handed. You won’t let him in, as you don’t believe he can do the job. Applies to your loan application.
If you do not have all the information required to apply for a loan, your bank or lender will not take you seriously. These include updated financial statements and a business plan.
Plan well for the loan
Borrowers make a standard error when applying for loans without thinking about how they will manage the real-estate project. A recipe for failing an application. Lenders don’t care how you intend to repay the loan but how you plan to use it to achieve results. It would help if you had a clear and compelling plan for using the money. Clear-cut goals show your lender and bank that you are serious about your application. This will increase your chances of getting approved.
Know your credit score
The credit score is a summary of your credit history. It is calculated using repayment criteria and spending criteria. However, other factors may be necessary. Your credit score will give you a clear picture of your financial situation. This information will help you decide whether you want to continue your excellent work or tighten your belt. You will only sell yourself short if you know your credit score. A strong credit score doesn’t mean you have to accept loan offers with stricter terms and conditions.
How to improve your credit score
A good credit score in mortgage finance sends the message that you value settling your debts more than anything else. Let’s take a look at some ways to improve your credit score.
Know your debt-to-income ratio
A ratio of debt-to-income (DTI) is calculated by adding all monthly debt payments to your gross monthly income and dividing them. A lower percentage of debt to pay means you can repay your loans on time. A typical DTI ratio of 43% is the maximum a borrower can have while still being eligible for a mortgage. Lenders will prefer a lower percentage, but it is possible.
The DTI ratio compares how much money you make each month and how much debt you owe. This window allows you to view your finances through the eyes of a creditor. It displays how much of your income spent on debt payments (mortgage, credit cards, rent). Knowing your DTI ratio can help you prioritize necessary spending and encourage you to protect yourself financially.
Settle your debts
It is simple and effective to improve your credit score by settling your debt. Your credit score is a ratio of how much you owe to how much income you have. Therefore, having fewer Owings naturally leads to higher credit scores. The lower your Owings, the better.
You must pay your bills on time.
No matter what other strategies you use to improve credit scores, late payments will not be an effective strategy. Late payments can also reflect on credit reports for up seven and a quarter years. You should do your best to pay your bills promptly. An automatic bill payment is a great option. To do this, however, you must ensure that your account has enough money to pay your bills. Your credit score will be affected if your account goes into overdraft.
Regularly examine your credit reports.
Another great way to improve and maintain a high credit score is to review your credit score. You can spot changes in credit scores over time by checking them regularly. Then, you can determine the appropriate actions to take based on these variations. You can also identify errors in reports through reviews that could improve your credit score. You can dispute information early and have it corrected. Will ensure that your credit score is solid.
Most Frequently Asked Questions
Questions and Answers
Q: What is the minimum down payment required to get a commercial mortgage?
Ans: Your lender and loan type will determine the cost of your mortgage down payment. Commercial mortgage down payments are usually between 15% and 35%.
Q: Can I buy a commercial property with a commercial realty loan?
Ans: You don’t. However, CRE loans can be an excellent option for commercial property loans. That’s because they come in bigger sizes than other loan types and offer actual estate-project-friendly payment structures.
Q: What are the fees and costs associated with commercial real estate loans?
Ans: There are many fees associated with CRE loans. You will have to pay appraisal fees and origination fees. Survey, application, and legal fees are some of the other costs that you might encounter.
