Loan FAQ Library

Commercial

What is an SBA 7(a) loan?

The SBA 7(a) loan is the Small Business Administration's flagship lending program, offering loans up to $5 million for a wide range of business purposes including real estate, equi...

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Commercial

What is an SBA 504 loan?

The SBA 504 loan program provides long-term, fixed-rate financing for major fixed assets such as commercial real estate and heavy equipment. It is structured as two separate loans:...

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Commercial

What LTV ratio do commercial lenders typically require?

Commercial lenders typically require a loan-to-value (LTV) ratio between 65% and 80%, depending on property type and loan program. Stabilized, income-producing properties like mult...

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Commercial

What are typical term lengths for commercial real estate loans?

Commercial real estate loans typically have shorter terms than residential mortgages, often 5, 7, or 10 years, with amortization periods of 20–30 years. This creates a balloon pa...

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Commercial

What is a commercial hard money loan?

A commercial hard money loan is a short-term, asset-based loan funded by private investors or companies rather than traditional banks. Approval is based primarily on the property's...

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Commercial

What is a capitalization (cap) rate?

The capitalization rate (cap rate) is a key metric used to evaluate commercial real estate investments. It is calculated by dividing the property's Net Operating Income (NOI) by it...

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Commercial

What is Net Operating Income (NOI) in commercial real estate?

Net Operating Income (NOI) is the annual income a commercial property generates after subtracting all operating expenses, but before deducting mortgage payments (debt service), dep...

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Commercial

What is the difference between recourse and non-recourse commercial loans?

In a recourse commercial loan, the lender can pursue the borrower's personal assets if the property's value does not cover the loan balance after default and foreclosure. The borro...

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Commercial

What documents are needed for a commercial loan application?

A commercial loan application typically requires: current rent roll (list of tenants, lease terms, and rental amounts), last 2–3 years of property operating statements or tax ret...

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Commercial

What is a CMBS loan?

A CMBS (Commercial Mortgage-Backed Securities) loan, also called a conduit loan, is a commercial real estate loan that is pooled with other loans and sold to investors as bonds on...

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Commercial

What is a commercial construction loan?

A commercial construction loan provides financing to develop or significantly renovate a commercial property. Unlike permanent loans, construction loans are typically interest-only...

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Commercial

What are typical commercial loan origination fees?

Commercial loan origination fees (also called points) typically range from 0.5% to 2% of the loan amount, though hard money and bridge loans can charge 2–5 points. A $2,000,000 c...

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Commercial

What is a blanket commercial mortgage?

A blanket mortgage is a single loan that covers multiple properties under one financing agreement. Instead of separate loans for each property, all properties serve as collateral f...

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Commercial

How does commercial loan prepayment penalty work?

Most commercial loans include prepayment penalties to protect lenders from losing expected interest income when a loan is paid off early. Common prepayment structures include: step...

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Commercial

What is a good DSCR ratio for commercial loan approval?

Most commercial lenders require a minimum DSCR of 1.20, meaning the property's NOI is 20% greater than its annual debt service. Multifamily agency lenders (Fannie Mae, Freddie Mac)...

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