How Do Commercial Equity Lines of Credit Work?
Commercial equity lines of credit, also known as CELOCs, involve a commercial real estate owner being given a line of credit that allows them to borrower against the equity in their property. Commercial equity lines of credit can be used for a variety of purposes, including growing your business by hiring new employees, obtaining new inventory, financing property improvements, or even purchasing a new piece of real estate. CELOCs are much like the home equity lines of credit (HELOCs) found in residential real estate.
What are the CELOC Leverage Requirements?
In general, commercial equity lines of credit permit LTVs up to 70-75%. However, this depends on a variety of factors, including the credit score and financial strength of the borrower, and how much debt they currently have on the property.
What are the Costs and Fees for CELOCs?
Just like other commercial real estate loans, commercial equity lines of credit have certain associated costs and fees. These include origination fees, appraisal fees, and application fees. However, some lenders, such as Wells-Fargo, waive certain fees, such as the appraisal and application fees, in order to induce more borrowers to take out a loan with them.