November 10, 2021

How to Get a Loan for a Commercial Building

Purchasing a commercial building requires investing your time and financial resources. However, most people don’t have enough expendable cash to pay for a property upfront. Fortunately, commercial real estate loans offer a financial solution.
If you are looking to invest in commercial real estate, Rakow Commercial Realty Group can help. Here we have created a guide designed to help you learn more about obtaining a commercial real estate loan.

Evaluate Your Financial Circumstances

As you prepare to secure a commercial real estate loan, you should first evaluate your current financial circumstances. A lender will require detailed information about both your personal and business finances. When it comes to personal finances, a commercial real estate lender will run a credit score check and verify that you do not have any existing tax liens, defaults on previous loans, or foreclosures on your record. When it comes to business finances, lenders need to evaluate your current debt-to-income ratio as well as check your business credit score.

Prepare Details About the Property

When completing your commercial real estate loan application, provide your lender details about the property you intend to purchase. Some factors that the lender will need to consider are:

  • The current condition of the building
  • The location of the property
  • The intended use for the building
  • Income & expenses for the property 

It’s worth noting that most commercial real estate loans require applicants to be an owner-occupant. This means that your business will need to occupy at least 51% of the building to purchase it. You should make sure that the property you intend to purchase will work for your own business needs and act as a viable investment to attract other business owners to lease space.

Consider Lenders 

There are various types of lenders available that offer commercial real estate loans. You should consider the differences between them and select a lender that will meet your needs and circumstances.
The most common commercial real estate lenders include:

  • Banks — This is a popular option because banks offer favorable interest rates. However, their loan application process moves notoriously slow.
  • Commercial lenders — These lenders often move faster than banks, as their underwriting requirements are not as strict. However, their interest rates are typically higher.
  • SBA loans — These are government loans that are available to business owners who want to purchase real estate. They offer lower interest rates and smaller down payments, but they have very strict requirements for applicants. The approval process can be both cumbersome and slow.


The Application

Once you have selected a lender, you should proceed with filling out the application. To increase your chances of approval, you will want to offer a large down payment or ask someone (a friend, family member, or colleague) to co-sign your application. This gives the lender more confidence in your ability to pay back the entirety of the loan on time.
By following these simple steps and our tips for gaining approval, you will be on your way to commercial real estate ownership in no time. For more information on how to become involved in commercial real estate investments, contact RakowGroup today.

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