Everything You Need to Know About the Commercial Loan Application process


Closing on the right type of commercial real estate loan might be one of the most important decisions you will make as a Commercial investor. With a plethora of loan options and lenders to choose from, the task of zeroing down on the right loan might be overwhelming. However, the good news is that it needn’t be daunting.

Finding the right Commercial Real Estate Loan can be done without getting overwhelmed if you do proper research. Don’t worry; we have done the legwork for you.

This blog is an overview of everything you need to know about the Commercial Loan application process. In this blog, we’ll break down the where to’s and how to’s of finding the best commercial real estate loan for your property. We’ll walk you through the main stages of securing the perfect Commercial loan for your property. Read on to understand what to expect at every stage, and close in on the best loan for your property.

How to Apply for a Commercial Loan

Understand your requirement & get clarity on how you intend to use your loan

Choose the appropriate loan type for your financing needs

Choosing the right commercial real estate lender

Prepare your loan application

Close in on your loan

Read in detail below

5 Stages to Secure A Commercial Real Estate Loan

#1 – Understand your requirement & get clarity on how you intend to use your loan

The first step towards securing a Commercial Real Estate Loan is to understand your requirements and uses. Before you hunt for the best commercial real estate loan rates, you should know why you need a loan and how you intend to use it. Knowing this clearly beforehand helps you shortlist the various types of loans and lenders, and lets you zero down on the right loan. With various loans out there, it can get hard to decide which loan is the best fit for your needs.

To bridge this gap, ask yourself relevant questions about the use and applicability of loans and find the most appropriate answers. Here are three quick examples of how you can do the same:

Are you building a new property? In this case, you should decide the land to buy and consider many factors like occupant rates, market rates, and the location you’re planning to buy a property in.

Are you considering remodeling an existing property and flipping it for a profit? In this case, the best loan options might be commercial bridge loans or Commercial Refinance mortgages.

Are you planning to renovate your existing multi-family property in the hope of increasing rental rates? In this case, too, a short term financing option like Commercial bridge loans might be the best fix.

Similarly, ask relevant questions and find answers to them. These answers will clarify what loans might best fit your needs and what loans will be unnecessary for you. Thus, with this ground research in mind – you won’t be confused when approaching your commercial real estate lenders.

#2 – Choose the appropriate loan type for your financing needs

The next step would be to choose the right loan type for your property. From step 1, you will get a fair understanding of the loan’s nature that’ll best fit your needs. For example, you now know that taking a Commercial Bridge loan will be a good fit for repairs and renovations to the property, that’ll likely give you long term benefits and cash influx, through which you will clear your loan liabilities. Below listed are some of the most common types of commercial real estate loans with their use case:

Commercial real estate purchase loans – As the name goes, these loans are used to purchase commercial real estate property. These loans are for large amounts and longer-term periods, generally up to 20 years.

Commercial real estate construction loans – These loans are used to aid the construction needs of an existing property. These generally have shorter-term periods, ranging from 2 to 5 years.

Commercial real estate refinancing loans Refinancing loans are taken to refinance an existing loan with a new loan with better loan terms or rates. In most cases, commercial real estate investors would want to switch from a fixed-rate loan to fluctuating rate loan, and vice versa, or to reduce the term of the loan to minimize the monthly loan pay-outs.

Commercial real estate hard money loans Hard money loans are provided by non-bank private lenders and can be utilized by any investor who does not qualify for bank loans or SBA loans. These loans are very flexible in terms of loan amounts and dates as private lenders provide them. However, they generally carry higher rates as a trade-off for poor credit scores. They are a blessing for anyone who cannot get a traditional loan application approved.

The type of loan that you choose will set your path clear onto the next stage of zeroing down on the lender you want to work with.

#3 – Choosing the right commercial real estate lender

After deciding the type of commercial loan you want to take, the next step is to choose the commercial real estate loan lender you want to work with. Choosing a lender isn’t only about checking for the most trusted and authentic ones in the market but also about where you should consider where you stand as a borrower.

It is important because all lenders have specific loan eligibility requirements that need to be met to approve your loan application. There’s no point in applying for a lender where you stand no chance for approval due to their strict lending requirements.

For example, SBA loans generally require the borrowers to have a credit score of at least 650 to 700 to consider your loan application. Thus, when you know that your score is not up to the mark, you’d rather look out for other lenders.

To carry out this step, you should closely examine the banks’ various lending requirements and private lenders. Banks and traditional lending institutions generally have strict standards for ending requirements, including good personal credit history, good business credit score, coverage ratio, and annual revenue of the business. Additionally, the type of property you wish to buy or renovate, it’s property value, purchase price, operating statements, and loan-to-value-ratio will be considered before you approve your loan application.

Hard money lenders are the safe bet for any investor who fails to qualify for traditional loans. Private money lenders will need to prepare a loan application that will convince them of your loan repaying abilities despite having a poor credit score.

Additionally, they’ll require larger down payments and provide loans with higher rates. However, if you plan your Commercial Real Estate investment journey smartly, you can get way ahead in your investing success by working with hard money lenders.

#4 – Prepare your loan application

The next step after choosing the right Commercial Real Estate Lender is to prepare your loan application. Depending upon the lender you are choosing to work with, you will be needed to fill out a bunch of things ranging from – your personal income statements, business revenue statements, previous loan history, and so on.

Additionally, your lender might ask you to submit supporting documentation like business balance sheets, business plan, business tax returns, personal income tax returns, pay stubs in case of self-employed or salaried professionals, and other legal documents asked for by your lender.

Bank loans and SBA loans generally have a long list of documents to be submitted, and they take scrutinize these documents for authenticity. They might also ask you a couple of questions on how you plan to repay your loan to them on time. You might have to submit a projected income flow statement of your commercial real estate property you are funding in some cases.

#5 – Close in on your loan

Once the loan application has been approved, you can close in on your commercial real estate loan and kickstart your commercial real estate investment project. This step might take a few weeks, and sometimes even a few months, depending upon the lender you choose. On a general note, bank loans and SBA loans generally take around 3 to 4 weeks for processing, whereas hard money loans are processed faster.

These are the five stages to securing a Commercial Real Estate Loan that’ll tailor-fit your financing needs. Remember to be patient while you research for the best loans or lenders. Also, be duly diligent in providing all the necessary documents and information to your lenders to facilitate faster loan approval.

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