Commercial loans

Commercial loans come in many different shapes and sizes. It is a blanket term that can cover apartment building loans, industrial loans, office building loans, strip mall loans, care home loans.... The list could go on and on, but you get the picture. Many different types of properties are included under the commercial loan heading.

There are a number of sources for commercial loans as well. Most banks make commercial loans. This includes the large national or international banks all the way down to the local community banks and even credit unions. You will typically find the best terms for a commercial loan going through a bank of one sort or another, but terms can vary greatly from bank to bank, especially in today's market.

Another source for obtaining a commercial loan is a commercial mortgage broker. Commercial loan brokers work with many institutions, and are able to shop for you in order to help find the best terms. By working with a commercial loan broker, you can expect to pay slightly higher fees on your loan, typically one to two points, but it is likely that you can save many times that amount over the term of your new loan. In addition, you may have access to higher loan to value options, longer terms, better or no prepayment penalties and a lower interest rate than if you worked directly with only one bank.

One word of caution when working with a commercial mortgage broker. Be sure the broker you choose is a commercial loan broker. You don't want a residential loan broker working on your commercial loan file. Commercial loans are much different than residential loans. Not only will most residential loan brokers not have the expertise to represent you properly, but most likely they will not have access to the proper resources to truly warrant the additional cost involved.

A third source of commercial lending today is commercial hard money lenders. Hard money loans are really becoming a viable option these days as institutional lenders' loan standards tighten up. A hard money loan will be more expensive than a bank loan, 10-12% is pretty standard. In addition, you can expect to pay points ranging from two or three on up to seven, eight or more, depending on the particulars of your commercial loan.

The upside of looking to a commercial hard money lender for your loan needs is the relaxed underwriting guidelines. The main underwriting guideline for a hard money commercial loan is the loan to value of your property. If your loan to value meets the guidelines of your hard money lender, other issues can oftentimes be overlooked, helping you to move quickly to funding. These issues can include poor debt coverage ratios, unavailable tax returns, poor credit or other issues that may cause the banks to deny the loan. If a commercial loan has been denied by multiple banks or institutions, it may be time to look into your hard money options.

Of these options in today's market, choosing a commercial mortgage broker may be your best option. Oftentimes a commercial broker can present you with a number of options from large banks, community banks and even hard money lenders. In today's lending environment, having options and representation is well worth the cost of working with a broker.