Commercial Equity Loans: The Basics
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.
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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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Related Questions
What is a commercial equity loan?
A commercial equity loan is a loan that allows 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.
The terms of a commercial equity loan will vary depending on the lender, but typically the loan will be secured by the property and the loan amount will be based on the equity in the property. The loan may also require a down payment and may have a fixed or adjustable interest rate.
If you would like to learn more about commercial equity loans, please fill out the form below to speak with a commercial real estate loan specialist.
What are the benefits of a commercial equity loan?
The main benefit of a commercial equity loan is that it allows 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 usually offer up to 75% LTV, and lenders generally offer a wide variety of term options.
A commercial equity line of credit (CELOC) may also be a good 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.
What types of commercial properties are eligible for a commercial equity loan?
Commercial equity loans are typically offered for a broad range of eligible commercial property types, including retail, office, industrial, multi-family, hospitality, and more. According to Commercial Real Estate Loans, the following asset classes are where they offer their greatest strengths and experience for arranging commercial real estate loans:
Highlights Property Types Loan Types Lenders Retail Retail Loans from $1M Banks, private lenders Office Office Loans from $1M Banks, private lenders Industrial Industrial Loans from $1M Banks, private lenders Multi-Family Multi-Family Loans from $1M Banks, private lenders Hospitality Hospitality Loans from $1M Banks, private lenders What are the requirements for a commercial equity loan?
The requirements for a commercial equity loan vary depending on the lender. Generally, you will need to provide proof of income, a credit score of at least 650, and a down payment of at least 20%. You may also need to provide additional documentation such as a business plan, financial statements, and tax returns. Additionally, the loan amount and terms will depend on the value of the property and the lender's risk assessment.
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What are the risks associated with a commercial equity loan?
The risks associated with a commercial equity loan include the possibility of foreclosure if you are unable to make payments, as well as the potential for a decrease in the value of the property. Additionally, if the loan is not structured properly, you may be subject to higher interest rates or fees. It is important to understand the terms of the loan before signing any documents.
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