Commercial Real Estate Loans Phoenix Arizona

What are Commercial Real Estate Loans?

A loan secured by lien on a commercial property is a CRE Loan. It refers to any income generating property that is used solely for business purposes. We offer competitive rates on all of our commercial loan programs. Click on a link below to find more information about each;

Usually, the investor purchases the property, leases the space, and collects the rent for the businesses operating within that property. These loans finance the acquisition, development, and construction of these real estate properties. They are made to Real Estate Investment Trusts (REIT), partnerships, developers, corporations, trusts and funds.

New real estate property in Phoenix.

Period

These loans are given by banks, insurance companies, pension funds, private lenders and the government (U.S. Small Business Administration’s 504 Loan Program). And all these lenders take varying levels of risk thus the rate of interest varies. The CRE loans have a 5 – 20 years term with the amortization period longer than the loan. For example, you may take a loan with a 7-year term that can be amortized over 30 years. This means that you can make monthly payments for 7 years as if the loan was to be paid off over 30 years and there is only one balloon payment of the remaining balance. For example, if you borrow a million dollars at 7%, you will make a monthly payment of $6,653 for 7 years, followed by a final balloon payment of $918,127.

Types

There are 3 types of commercial real estate loans;

• The traditional commercial mortgage of the 5-25-year; The interest rates are 4.5% – 7.5% and usually variable with a balloon payment at amortization.
• The SBA 7(a) loan for commercial real estate with the 10-25-year term and fully amortized. The rate of interest may be variable at 5.5% – 6.75%, with no balloon payment.

• The CDC/SBA 504 loan for commercial real estate with 10 or 20-year term. These loans have a fixed or variable rate of interest at 4%-5.5%. The loan is made in two parts;
  • The 1st mortgage from the bank can be at a fixed or variable rate of interest, there may be a balloon payment.
  • The 2nd mortgage will come from the CDC at a fixed rate to be fully amortized.

The Owner-Occupied properties (up to 51%) are eligible for government-backed loans while the Investment or Income Producing property are not.

How to qualify for these loans?

When evaluating your case as an individual, the lender will consider;

• The collateral
• Your credit score should be 680 plus
• No recent tax liens, foreclosures or bankruptcies
• The business should be at least 3 years old
• 3 – 5 years of financial statements
• Down payment of at least 10% of property value
• Income tax returns
• Financial ratios such as loan to value and debt service coverage
• The business should have a DSCR of 1.15 plus

An entity may not have a financial or credit history, the lenders consider the history of the principal owner for the guarantee of the loan. The lenders track their financial record and recover the loan from in case of a default. If there is no guarantee the loan in given against the property in consideration. This is known as a non-recourse loan.