Understanding Commercial Loans

Orange County Commercial Loan Company

Peach Capital Funding

Commercial loans are different from traditional home loans. If you are new to commercial property, expect both the loan terms and the application process to be different than applying for a home loan. Peach Capital Funding is here to help you with this process and help you get through the commercial loan process.

The Commercial Loan Process

 Timing

Getting a commercial loan takes more time than a home loan. You should plan a minimum of 45 days depending on the type of commercial loan needed for your needs. We urge you to discuss timing with us before you lock into a purchase agreement for a commercial loan.

Commercial Property Appraisals

This type of Appraisal takes longer and cost more for commercial properties.  Some borrowers will be shocked to hear commercial appraisals cost up to 5 times more than residential reports. You can expect to pay anywhere from $2000 or more, depending on the complexity of the study to get you the proper commercial appraisal.

 Why is this? Commercial appraisers have to do more work. They have to determine the land value, the cost to rebuild, the zoning for the property, the highest and best use of the property, comparable sales of other similar buildings, market lease rates for similar buildings, the net operating income, market cap rates and the depreciation on the commercial building.

As you can see, commercial appraisals require lots of time and expertise, which accounts for their higher cost to evaluate the commercial property the right way. 

Commercial Loan Terms are Different

Loan to Value (LTV).

You might be able to buy a house with zero down, or as little as 5% percent, but not a commercial building. Commercial loans require at least 10% but typically will cost you 25-35% down depending on the property and loan type.

Loan Term.

Most first-time commercial borrowers ask for a 30 year fixed loan (like a home loan) but this type of loan is basically non-existent in the commercial loan world. The most typical loan has payments amortized over 25 years.

Most commercial loans have balloon payments, typically after 10 years. Commercial borrowers, like residential borrowers, will frequently want to refinance their properties, so a balloon loan usually does not need to be looked at as an issue.

Fixed Rates.

Loans fixed for one year or less are considered adjustable.  With home loans, a loan that fixes for five years then adjusts will probably be called an adjustable loan. So if you ask for a fixed commercial loan, you may be presented with choices of loans that are fixed for five years or more.

The longer your fixed rate period, the higher the interest rate will be. Most people choose not to fix rates longer than 10 years to avoid higher rates and a longer prepayment penalty period for a commercial loan.

FIND OUT NOW HOW PEACH CAPITAL FUNDING CAN HELP YOU GET THE RIGHT LOAN FOR YOUR NEEDS AND HELP YOU GET APPROVED FOR YOUR LOAN WHILE MAKING THE PROCESS EASY AND STRESS FREE.

CONTACT US NOW TO START THE COMMERCIAL LOAN APPLICATION PROCESS.