What are some good companies that provide funding for commercial properties. I am looking to get a pre approval. I have good credit but I have only had credit for a few months. I have a job but its not the best job in the world. Can anyone give me some good advice? Thanks guys…
Pre-approval on commercial does not work the same way as residential. In commercial the collateral is more important than the borrower. If your credit and income is marginal, but the subject property has strong financials the commercial lender will take that into consideration.
In short…it’s best to have a property in mind.
But in commerical you will need to have strong assets and cash too… Using conventional commerical financing, you will need at least 10% down payment…Its very rare to get away with 100% financing and banks will want to see you have assets…
If your credit is fairly new and the collateral is sketchy, SBA loans offer an alternatve to traditional commercial lending. It may be available for you. SBA loans allow for the use of unconventional collateral other than real property.
For traditional commercial lending, you should definitely have a property in mind, unless you are worth a bundle and have oodles of credit the chances of getting a pre approved commercial loan are slim at best.
True commercial is different than residential but if you have a property estimated value and valid credit score, a pre-approval can be obtained within 72 hrs of submission. After that an appraisal follows and closing within 30 days. If you have a particular property in mind feel free to contact me.
On larger projects the lender knows you won’t be able to make the payments anyways if anything happens. They will still look at your financials to see that you have some credibility but the LTV and NOI are probably the two most important factors.
Just a quick comment about a post above… the SBA cannot finance pure real estate deals. At least half the value of the property must derive from the operation of a business.
Now to your question;
The only pre-qualifying I’ve ever done for a commercial real estate deal is when I pre-qualify the lender or bank to verify that they do the types of loan that matches the property type, location, and deal structure.
Seriously, the capital markets are literally awash in money. But there are over two dozen types of lenders and at least two dozen loan types. It’s hard to pick a lender or a loan without knowing the specifics of the deal.
Your best strategy is to first get your financial statement in order (if you haven’t already done so), learn how to analyze a deal, and then find one that matches your talents and resources. Now you’re ready to take advantage of it.
Once you’ve found a viable deal, then select the type of financing (e.g. short-term, permanent, fixed rate, floating rate, interest only, etc.) that will support the investment plan. (e.g. flip, a turnaround or a buy-and-hold). Then you’re ready to screen lenders. They will literally compete for good deals. Especially local independent banks.
I would like to get started in commercial realestate but need to be eductated first. Does anyone know any low cost good information or programs to get started with?
Phil, with any transaction it depends on the type property, credit scores, LTV you are looking for, etc. If you are looking for a stated program or full doc; do you have a property in mind or just looking for information on how to fund commercial properties?
You can get prequalified for a commercial loan.
Let me put it another way. Your property can
get prequal for a commercial loan. If you have
the ability to pre underwrite a specific deal, this
is simply put…pre qualifying…or preunderwriting.
Whereby you can take your preunderwriten package
and use it as a negotiating tool with your seller and
shop your loan around with various lenders showing
your level of professionalism.
With that said, yes you do need a specific property
in mind. What types of deals are you looking at?
Apartments, Retail, Hotels, Industrial, etc…
The type of property and the required Debt Service
Coverage Ratio is what is going to be important for qualifying
a commercial deal.
For instance, an Apartment building will require a DSCR of 1.20.
Meaning, that the NOI has to be 20% more than the mortgage
payment. Depending on what type of programs the lender has,
you might be able to manipulate this number with an intrest only
loan, or a 90 year amortized loan ;D
Yes, every deal is Unique.
Hope this helps.
ICE Income … Collateral … Equity
Need to raise FICO. IF low NEED a co-borrower. Do you have an LLC.
Get the Property on contract! How much down and closing cost?
What is NOI and DCR?