We’ve noticed after connecting with countless real estate buyers looking to secure a commercial loan that they often have many of the same questions in common about the process. From credit scores to documentation, understanding what it takes to get approved is crucial.
In this article, we will explore some of the most pressing questions we have noticed our real estate buyer clients usually have about commercial loans, and provide clear answers to help you navigate the process.
1. What is a Commercial Loan?
A commercial loan is a specialized form of financing designed for non-residential properties and business purposes. These loans facilitate the acquisition, development, or refinancing of properties like office buildings, retail centers, industrial facilities, hotels, and other income-generating commercial real estate. Additionally, loans used for working capital, start up companies, mergers, acquisitions, and equipment loans. In summary, loans used for business purpose.
At Innovative Capital, we help our clients, like real estate buyers and business owners, access the funding they need by connecting them with various commercial loan options through our nationwide network. Learn more about our tailored process works here.
2. What Factors Do Lenders Consider When Approving a Commercial Loan?
Commercial lenders evaluate various factors to determine loan approval. These include the borrower’s creditworthiness, business financials, cash flow, property condition and value, location, and the borrower’s industry experience.
3. What Credit Score is Needed to Qualify for a Commercial Loan?
The required credit score for a commercial loan varies by lender and loan program. Generally, a higher credit score (typically 650 or above) enhances approval chances and leads to more favorable loan terms. However, even if you are working with a credit score on the lower side, we may still be able to get financing for your needs – get in touch with our team for a quote.
4. What Documents Are Needed to Apply for a Commercial Loan?
To apply for a commercial loan, you will want to prepare essential documentation, such as financial statements (income statement, balance sheet), personal financial statements of key principals, tax returns, bank statements, property details, and sometimes a comprehensive business plan. Having these items prepared ahead of time will speed up the process for finding and securing commercial loans. You don’t have a second chance to make a first impression with lenders.
5. What is the Typical Down Payment Requirement for a Commercial Loan?
Commercial lenders typically require a down payment ranging from 20% to 30% of the property’s purchase price. However, the exact down payment can vary based on lender policies, borrower creditworthiness, and property type. Additional collateral such as other real estate can be used to increase leverage and decrease the amount needed for a down payment.
6. Are There Government-Backed Loan Programs Available for Commercial Loans?
Yes, the Small Business Administration (SBA) offers government-backed loan programs that facilitate commercial lending for small businesses. These programs provide guarantees to lenders, making financing more accessible with competitive rates and terms.
Our team has a nationwide network of professionals in both traditional and alternative financing. If you were turned down by your bank, chances are we can connect you with another bank for an SBA loan or other business loan if you are seeking traditional financing.
7. How Long Does the Commercial Loan Approval Process Take?
The commercial loan approval process typically spans 45- 60 days on average. However, with Innovative Capital – a trusted direct lender – we can fund in as little as 7–10 days. Our intention is to provide our clients a one stop shop for commercial lending. We have loan programs to provide the right loan for our clients.
8. Can I Use Collateral Other Than the Property I Am Purchasing for the Loan?
In some cases, lenders may accept additional collateral, such as other real estate properties or valuable assets. This strengthens the loan application and reduces for the lender.
We recommend working closely with experienced commercial lenders like us, mortgage brokers, or financial advisors to navigate the commercial loan approval process successfully.
Get Loan Options from Innovative Capital
Innovative Capital is your trusted direct lender in San Diego, with the capability to fund loans in as little as 7 days. Serving clients and referral partners both locally and nationwide. We have offices in San Diego, Newport Beach and Scottsdale, AZ. we have a proven track record, having directly funded over $500 million for our clients, while also brokering hundreds of million in funded loans to our lender network.
Our vast network and meticulous attention to detail enable us to hunt for the best loan option tailored to your specific needs. We handle the heavy lifting, allowing you to focus on other aspects of your business, and we’ll present you with a list of options featuring the best rates and terms.
Ready to explore your financing options? Get a free quote by entering your details below, and one of our team members will be in touch shortly. We’re here to help you secure the funds you need swiftly and efficiently.
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