Applying for a Commercial Mortgage

By: First Union


Applying for a Commercial Mortgage

Often small business owners will look into applying for a commercial mortgage for purchasing a new facility, buying a storefront, even for a warehouse purchase. This can seem a daunting process, especially if the real estate in question is of a larger scale. Gaining access to a commercial real estate loan or mortgage of this nature can be tricky for small business owners. There are programs available through the Small Business Administration, but these can be more difficult to qualify for, not to mention, the process is a bit lengthy. So where do smaller companies looking for commercial mortgages turn? In this article, we look at what's involved with a commercial mortgage and some of the channels available through which a small business owner might be able to procure such a loan.

Commercial mortgages are not just for purchasing properties. Often business owners will take out a commercial real estate loan to renovate or expand a current facility. Keep in mind, that many lenders will require that whatever property purchased or whatever the renovation is undertaken, the business has to occupy the structure—at least 51% of the building needs to be owner-occupied.

What Lenders Want to See When You Apply for a Commercial Mortgage

As with most commercial loans, with a commercial mortgage, you're going to have to submit specific documents in conjunction with your loan application. A lender will evaluate these statements and documents to determine whether or not your business is worth taking that kind of a risk on. The documents and information provided will pertain to three primary areas:


More so than a residential mortgage, a commercial mortgage generally gets more scrutiny. This is large because small businesses are considered a bigger risk, as so many small businesses will often go under in their first three years of operation. A lender will without question ask to see your books and all relevant financial statements. They will be looking to see whether or not the cash flow is there enabling you to make that monthly payment comfortably.

The lender also looks into the business credit score and payment history. If you don't have a high enough score this doesn't necessarily disqualify you from a commercial mortgage; however, you are likely going to be looking at higher rates and less favorable terms.

Also keep in mind, that when evaluating the business, a lender is going to want to see it set up as an LLC, S Corp, or C Corp. Giving a commercial mortgage to a sole proprietor is considered far riskier than dealing with the other business structures. If you are a sole proprietor, you want to think carefully about taking out any real estate loan of this nature, because if you default they could seize your assets to recoup any losses.

Personal Finances

When the business is a smaller one, ownership of that business tends to rest in the hands of just one or two people. That said, the lender is going to want to account for the owner's finances as well as the business's finances. They will therefore pull your credit score, ask for tax returns, as well as bank statements most likely.

Property Details

The property itself is going to be scrutinized if a business applies for a commercial mortgage on that property. The primary reason for this is because that property will often be the collateral on the loan. That is to say, if you do default and cannot make monthly payments, the lender will take the property back and try and sell it to recover lost funds.

Generally, the lender will lend you up to 70-75% of the value of the property. They will have an appraisal done on the facility or warehouse, for example, to gauge what it is worth and based upon this number determine how much they will loan you for purchasing the property. This means that the business will have to come up with a down payment for the remainder not covered by the commercial mortgage.

Preparing Your Commercial Mortgage Application

The commercial real estate loan application process tends to be a bit longer, requiring more paperwork than some other types of business loans. Now keep in mind, the speed at which the loan is processed will also depend on the type of lender that you choose to work with. For instance, an alternative or online lender can usually get you the funds faster than let's say a traditional bank. Many banks will ask for the following and stipulate certain requirements:

  • Five plus years of business tax returns.
  • All relevant financial records to include books, balance sheet, financial reports up to five year's worth, and any current leases in place.
  • Projected cash flow for the duration of the mortgage.
  • Credit reports for the business as well as personal reports for all owners of the company.
  • An appraisal of the property by an outside party.
  • An in-depth business plan detailing how the property will be used and potentially will also require a detailed explanation of the company's management ability about the property.

With an alternative lender, the application packet may look a bit different for a commercial mortgage. They tend to have fewer requirements and their benchmarks are not quite as stringent especially in terms of years in business and credit scores.

If you and/or your business do have lower credit scores, that is not to say that you are automatically disqualified from a commercial mortgage. Although you will probably not receive the most favorable rates/terms, there are programs out there that enable you to get the money you need for a property you wish to purchase.

First Union Lending is here to help. Even if your credit score is less than ideal, we still have funding programs that may work for you. With short term loans, merchant cash advances, and SBA loans, among others, we have a solution for just about every small business need. Call today!

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First Union Lending LLC is a dually licensed Lender/Broker with its main offices located at 4900 Millenia Blvd First Floor Orlando, FL 32839. First Union Lending LLC and its ads are meant for continental United States, including Alaska and Hawaii small business owners. Business Loans offered by First Union Lending LLC have varying rates and terms that can range from 30 - 120 payments and all rates and terms are based on eligibility of the business and its owners. The actual terms are based on credit, business history, industry, amount and terms. As an example, a $5,000 loan paid over 5 years at 8% would have a total repayment of $6,082.92 over the life of the loan. We use the latest encryption to protect sensitive information transmitted online, as well as run our own secure server network to ensure your information is protected offline as well. California loans made pursuant to the California Financing Law, Division 9 (commencing with Section 22000) of the Finance Code. All such loans made through VBJ Consulting, LLC, a licensed finance lender/broker, California Financing Law License No. CFL#60DBO78163

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