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Commercial Equity Loans: The Basics

Commercial Equity Loans: What You Need to Know

If you need capital to make repairs or renovations to your commercial property, or you’d like additional funds to purchase a new investment property, you may want to take out a commercial equity loan. Commercial equity loans allow you to tap into the equity you’ve built up in a property in order to get cash. These loans are typically offered by banks, but can be offered by private lenders. Commercial equity financing is also ideal for business owners that need additional funds to pay bills or expand their business.

Commercial Equity Loans vs. Commercial Equity Lines of Credit

Commercial equity loans usually offer up to 75% LTV, and lenders generally offer a wide variety of term options. While traditional commercial equity loans are good for many borrowers, in some cases, a commercial equity line of credit (CELOC) may be a better option. Unlike a commercial equity loan, which offers borrowers a one-time, lump sum amount, commercial equity lines of credit offer borrowers a revolving line of credit that they can use at any time during a specific, pre-determined period. During this period, which often lasts between 5-10 years, a borrower can take as much or as little money out as they would like, up to their credit limit. They will then need to repay the loan over a set repayment period. CELOCs are often best for borrowers who aren’t sure how much equity they want to take out, but want ready access to capital when they need it.

CMBS Cash-Out Refinancing May Be Best For Larger Properties

If you want to take out a loan of $2 million or more and would like some cash out, a CMBS (commercial mortgage backed security) loan could be the ideal option. CMBS loans are generally asset based, so they don’t have extremely stricter financial requirements for borrowers (though this is slowly beginning to change). Like traditional commercial equity loans, CMBS financing usually offers up to 75% LTV. In addition, CMBS loans are fixed-rate, and currently offer very competitive interest rates (right now most CMBS loans vary from 4.30%-5.00%).

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