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Guide to commercial real estate loans in the USA
June 10, 2022 at 9:30 PM
Image of a boardroom with a concrete floor purchased with a commercial real estate loan in the USA.

As competitive as the residential real estate market is, it can be equally frustrating when companies seek funding for commercial endeavors. Purchasing a new property for your business can present unexpected challenges for an organization. If you’ve never been through the commercial real estate process, you may lack the expertise and insight to find the right lender for your project. Commercial mortgages are totally different from residential mortgages because of the greater risk associated with borrowers. Twenty percent of small businesses fail their first year. Within ten years, just over 30 percent of companies survive–statistics reflected in the much shorter terms of commercial real estate loans. Review this guide if you’re getting ready to apply for financing to purchase commercial property.

Commercial lenders

It’s possible to go to a bank to apply for a commercial real estate loan, but getting approved can be challenging. Banks are much warier of the risks in commercial lending and so have strict requirements for the application. Beyond the minimum requirements, commercial lenders also want to see a thriving business that will deliver positive cash flow and prove to be a good investment.

Traditional bank lenders typically require:

  • 15 to 35 percent down payment
  • A personal credit score of 700 or more
  • One year of business history

There’s no cap on the amount a commercial lender can give a business because they’re the ones writing the terms of the loan.


Small Business Administration-backed loans

Much like how the Federal Housing Authority backs mortgages for first-time homebuyers, the federal government provides commercial lending products for small businesses. The U.S. Small Business Administration provides more accessible lending options. One of the requirements for an SBA loan is first to be denied for traditional financing from a commercial lender. SBA loans are more accessible but have stricter application requirements:

  • Three years of business history
  • A credit score of 680 or higher
  • Repayment terms from 10 to 15 years
  • For up to 90 percent of the purchase amount, with ten percent down

The SBA doesn’t finance the loans but backs them through SBA-approved lenders, including traditional banks and private lenders.

Hard money loans

Private lenders, such as hedge funds, typically look for investments that will provide a return. Hard money loans can be used for commercial real estate purchases but are more common when a business wants to renovate or for fix and flip projects. One of the main advantages of hard money lending is that it delivers fast funding instead of the months it may take to go through the traditional lender process.

A hard money loan often ends up being the best option for businesses that need to act fast to seize new opportunities. Some may refinance with a more traditional commercial loan product and longer repayment terms.

Establishing a relationship with a financial consulting firm like NTIB means you have experts by your side when you need business financing. We provide expertise to our clients backed by years in the industry so they can confidently navigate business lending products.

Schedule a free consultation with NTIB Finance and Consulting to secure a commercial real estate loan in the US.

NTIB Finance and Consulting works with companies across the United States to get their finances in order before securing financing. We bring an invaluable outsider perspective to our clients to help them restructure and implement innovative business solutions. When you’re ready to raise debt capital, the NTIB team is here to provide expertise, experience, and insight about your organization’s future. We devote the time to getting to know our clients, their goals, and their finances. Our guidance leads them to the ideal next steps for their organization.

Contact NTIB for a free consultation if you’re preparing for the application process for a commercial real estate loan.