Commercial Financing

Can someone introduce me to commercial financing?

Questions:

Is it similar to residential financing?
Can I borrow at 90% LTV or more?
Is financing parameters different for type of properties (gas station, apartment buildings, etc)
If I have an LLC with some credit cards under its name that is two years old, Can I use it to finance commercial properties?
At what point, lenders stop looking at my credit and take only LLC’s credit for financing reasons?
What sort of closing costs to expect, say for an apartment building with 10 units?
Are the interest rates higher than residential loans?
Are the interest rates linked with Treasurey Notes, like residential loans?
How do I find commercial lenders?

Please add any information that can educate me and others with this process.

  • Is it similar to residential financing?
    -Yes and No. Rates and closing costs tend to be higher while offered LTV’s tend to be lower.

  • Can I borrow at 90% LTV or more?
    - 90% is the max in most cases. If you have additional equity which can be pledged you can in effect purchase a commercial property with no cash out of pocket.

  • Is financing parameters different for type of properties (gas station, apartment buildings, etc).
    -Yes. Different LTV’s and Rates. On some commercial purchases the lender wants to see a history of experience in the particular industry associated with the property.

  • If I have an LLC with some credit cards under its name that is two years old, Can I use it to finance commercial properties?
    -Yes…But some lenders may still require a personal guarentee.

  • At what point, lenders stop looking at my credit and take only LLC’s credit for financing reasons?
    -At anypoint the lender feels the corporate entity can “stand on it’s own”

  • What sort of closing costs to expect, say for an apartment building with 10 units?
    -Closing costs can be as high as 5% or as low as 3%.

  • Are the interest rates higher than residential loans?
    - In most cases the rates are higher, but they can be about the same as residential rates if the loan amount is above $1 million.

  • Are the interest rates linked with Treasurey Notes, like residential loans?
    -Yes. In most cases they are linked to the 10 year treasury. Some lenders link to prime and LIBOR.

  • How do I find commercial lenders?
    -Throw a rock and you will probably hit one. ::slight_smile:

Good answers Patrick…

:banana:

Well…I have been doing my homework. lol

I’ve been moving more towards commercial in the last couple of months, I’m getting burnt out on residential. The pace of work is not as frantic and the pay is much better.

I’ve noticed a pick-up in commercial business in the last 6 months or so anyone else picking up on that shift?

Thanks a bunch for responding. I have more questions :slight_smile:

Under what conditions can I borrow upto 90%?

What sort of interest rate can I expect if my score is in the range of 670-680?

What does “stand on it’s own” mean? or what does it take to be on its own? Owning one property by an LLC is sufficient to satisfy “stand on it’s own” requirement?

How to check and improve LLC credit and how is it measured, like FICO for personal credit. In other words, what is considered good and how can I improve the credit if it is not good?

Some residential programs will allow 90% LTV

Good credit is 700+

Acceptable credit can be as low as 600

Rates are ugly for small loan amounts @ 90% (around 10% +)

When you have loan amounts above 2 million and you are looking for
an 80/10/10 rates are around 6.5% on the 80% and 13% on the 10%.

“Stand on it’s own”…= strong cash flow…if you default and the lender takes over the property will they cash flow?