Commercial Funding

Is it true that commercial funding is alot easier to get approved for with more units?


Commercial properties loans are based on the property, the investor (Buyer) is simple looked at as the responsible manager of the property and although they will look at your credit report, your report and score are not used to qualify for the loan, the reason to look at your report is to make sure you do not have defaults or no pays within the last few years.

Now if you were buying retail space as a shell that has not been built out, then your cash position will be reviewed to ensure you would have the ability to do a build out for a lease.

A commercial loan would be a 5 plex or larger apartment building. (Anything other than 1 - 4 unit residential)


When looking at commercial properties, what information will the lender look for? Why would someone sell a cash flowing property that is bringing in more than thier monthly payment?

Thanks for your help!

People’s priorities change. Maybe someone is selling a smaller building to get the money up to purchase a larger building. Or maybe they’re retiring. Or tired of managing a property. Lots of possible reasons.
The lender is going to want to make sure the property will take care of itself. Most people wanting to buy a property like you’re describing aren’t going to be able to make the monthly payment out of pocket so the lender has to make sure the potential is there for the deal. In deals like these, just the inspections can be very expensive. Expect the lender to want a large amount of money down. That’s why most people can’t get into these properties.
Many commercial loans will be set up to be at a fixed rate for something like 3 or 5 years, but amortized over 10, 15, or even 20 years. This allows them to re-evaluate the interest rate at the end of the fixed rate period.


Since I dont have a sizeable down payment, how would I get around this?

You could bring on a partner or partners w/ money. You could ask the seller to carry part of the note, but if the bank thinks you have 20% down in the deal and the seller is actually going to carry the 20% behind the scenes - that’s mortgage fraud.

Why would a partner with money want to give up 200k just to split half with me? How would the partners and i structure this type of deal?

Partnerships in general have to be mutually beneficial. If you don’t have the money, you’ll have to bring something else to the table. Maybe your money partner doesn’t have the time to do anything else with the property. You can provide property management and good negotiation skills to make this purchase a good deal. Maybe you have some rehab/repair skills.
My business partner is my wife who is also my best friend so we don’t worry too much on how to structure the deal. Other people on here can give good recommendations for that.
It is frustrating not being able to get into certain places. Right after we bought our first apt building, I found a 12 unit I wanted to get but there was no way I could come up with the $125k to get into it.

why can’t HMLs or PMLs lend you or me the down payment money? Essentially they are the partners you need right?

hard money lenders
private money lenders

Well according to me normal commercial finance for development would be released in stages as the funds are not secure until various amounts of work have been completed.From this way we kept our limited cash available to cover short term expenses until the business started generating profits.