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Things to Know Before Applying for Commercial Loans for Real Estate

People who have been in the real estate business know that lands sell at a price that keeps growing higher with each passing year.

If they feel the need of the land or space might come later on in their business, they would want to acquire that part.

But due to situations where they cannot shell out the amount within a notice period – the company is a small startup, or the capital is invested elsewhere – turning to commercial loans for real estate is the only answer.

Commercial loan for real estate

What are Commercial Loans for Real Estate?

Commercial loans for real estate imply funding the acquiring, constructing and developing of properties that will turn commercial properties like shopping malls, complexes and hotels.

The process for applying for commercial loans for real estate varies from that of residential loans in certain ways, such as:

  • Company or business must reside on at least 51% of the property they are about to acquire.
  • The business applying for commercial loans for real estate should be able to provide a down payment of 45% of the property value as banks will only provide for 55%.
  • If the company is going to renovate the property they need to maintain the area’s corporation code or building regulations.
  • Companies are required to provide for an annual net operating income (NOI) to the lenders to prove their debt score.
  • You need to have at least 5 years of tax returns. Along with that, good credit scores are needed for commercial property loans.
  • Financial reports and records of up to five years or the inception of the company (which is shorter) and even lease papers.
  • A detailed business plan charting the management and operation of the company along with future prospects.
  • Certificate or proof of a corporation or Limited Liability Corporation. Business proof including trade license and NOC from Government should be furnished.

For people who deal with lending commercial loans for real estate, they will scrutinize each and every aspect and sometimes might ask for additional documents and proofs.

Also Read: How to get instant online loans in Nigeria without collateral

When Applying for Commercial Loans for Real Estate

While the need for commercial loans for real estate is crucial especially for a flourishing business, and there are certain aspects that one needs to keep in mind while applying for the loan.

There are many banks and lenders who offer commercial loans for real estate but choosing the right one is a daunting task, and here you can find some tips to choose the best lender for a commercial loan for real estate:

  • Processing fees – while the fees for commercial loans are greater than personal or residential loans, there are certain lenders who offer some relief in terms of lesser percentages.

So before you apply for a commercial real estate loan, you must check the processing fees of the lender.

  • Rate on interest – like the processing fees, the interest rate for commercial loans for real estate is higher than any other loan.

Other than that, sometimes businesses are required to pay some amount as down payment.  So make sure you must know your down payment before you proceed.

  • Down payments – for commercial loans, banks offer not more than 55% of the property evaluation.

There are some lenders who offer 50% or 51%. The higher is this percentage the better is the loan amount for smaller businesses. This means they need to arrange for 45% as a down payment.

Applying for commercial loans for real estate is always the best way to ensure quick money payment for the purchase.


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