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If you are looking for a business loan for real estate purchases, you may be intimidated or confused by the range of options available in the financial marketplace. Understanding the criteria used by lenders to determine eligibility for commercial mortgages can help you achieve a greater degree of success when acquiring real estate for your business. Here are some key points to keep in mind when comparison shopping for commercial mortgage loans.

Options Vary Depending on Your Situation

Start-up companies may face much greater obstacles when seeking mortgage loans for commercial properties because of the following factors:

  •    Lack of an established business credit rating
  •    Limited data on profits and sales
  •    Not enough information on operating activities

businessmen applying for a business real estate loanThe U.S. Small Business Administration (SBA) offers programs specifically designed to help start-up companies acquire the funding needed to purchase real estate. If you are the owner of a small business, the SBA 504 Loan Program may provide you with an improved chance of obtaining a business loan for real estate acquisitions. This can allow you to expand your operations and improve your position in your local marketplace.


Features of Commercial Mortgage Loans

Depending on your company’s financial situation and your personal preferences and tolerance for risk, you can choose loans with features that include the following:payment-terms

  •    Fixed-rate mortgage loans offer greater stability and predictability over the duration of the lending arrangement. This can often allow increased control over budgetary factors and cash flow in the small business environment.
  •    Since the interest charged for variable-rate commercial mortgages is related to the prime rate, these loans can provide considerable cost savings for you if interest rates fall. Most variable-rate loans include a cap on interest to provide some protection for you if interest rates soar in the future.
  •    Interest-only mortgages are considered high risk by borrowers and lenders alike. These arrangements are designed to provide you with lower payments during the early years of your loan. After the grace period has ended, however, the payments can increase significantly to present serious financial challenges for unprepared borrowers.
  •    Balloon payment mortgages function in much the same way as interest-only mortgages. These loans, however, require a lump sum payment after a relatively short time, usually five to 15 years. If necessary, you can refinance the loan to make the required balloon payment.

If you have a solid business credit rating, you can achieve more advantageous terms and increased choice in the financial marketplace.

Commercial Mortgage Criteria May Vary

While the precise commercial mortgage criteria will vary from lender to lender, a few general guidelines apply to nearly every loan offered by these financial institutions:business real estate loan criteria

  •    Sufficient collateral must be available to secure the investment of your lender.
  •    Banks and lending institutions also look at your business credit score. Scores of 75 or above are usually required to qualify for commercial mortgages.
  •    Your personal credit scores may also play a role in your eligibility for these commercial loans.
  •    Finally, the cash flow of your business may be evaluated to ensure that you have the means to pay back your loan as agreed.

Doing a little research before deciding on a business loan for real estate purchases can help you achieve your goals in a cost-effective and practical way. This can also allow you to enjoy the most favorable terms and conditions for all your business finance arrangements.


If you are looking to obtain a business loan in Arizona, Oregon or California and aren’t sure if you will meet the criteria for a commercial loan, call us or submit a loan request to ReProp Financial today!

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