Qualifying for a CRE loan can sometimes be difficult, because it normally involves financing which is used to secure property to be used for a business. In order to get that commercial loan, you’ll be required to make a down payment of 25% or more, and you’ll have to use the majority of the property to conduct your business. You’ll also need to have a good credit score, or you probably won’t get serious consideration from a lender. That means if you don’t have a credit score above 660, you probably won’t be able to secure the CRE loans you need to pull off the transaction, unless you do some creative financing.
Types of CRE Loans
There are several different types of CRE loans which are available to real estate investors, and each of them carries their own terms and rates. A bank term loan will generally only be approved for borrowers who have established relationships with specific banks. SBA loans are available to business owners who have been declined for a loan by a traditional lender. Portfolio loans are available to businesses that operate in multiple locations geographically. Lines of credit can be used by companies that already own business property, and wish to borrow against the equity contained in that property.
CRE Loan Requirements
The big difference with a CRE loan as opposed to a home loan is that you will be using the property for some kind of business purpose, and you will be repaying the loan with revenues generated by that business. This means that lenders will want to be sure that the business you’re involved with is capable of making those loan repayments. Any lender will want to know that you have sufficient income to cover expenses for your business, so that you have money left over to pay the loan repayment.
In terms of your credit history, you need to have both a good business credit score and a good personal credit score, and you will also need to have been in business for a good period of time, so you won’t be regarded as a credit risk. That means you will need to have been in operation for at least a year and probably more like two years, before any lender will consider you for CRE loans.
Need a Commercial Real Estate Loan?
Pulling off that next big real estate transaction often depends on having the necessary funding. Contact us at Jasema Capital if you require funding to go through with a planned commercial real estate transaction.