Best Kept Secrets About Commercial Real Estate Loans

When it comes to business loans and real estate financing, the top five frequently asked questions business owners often ask are:

“Am I eligible for a commercial real estate loan?”

“How do I get a commercial real estate loan?”

“How much do you have to put down on a commercial loan?”

“What kind of loans are available for commercial property?

“How can I get a loan for a commercial property without money down?”

The answers may not only surprise you but may change your business forever.

What if I told you that the loan qualifications for a real estate loan are a lot easier than you think? What if I told you that the minimum requirements for a commercial real estate loan are often less than those of the traditional banks?   What if I told you that they are a lot better than a hard money loan?

What you’re about to read are perhaps the best-kept secrets about the SBA 7(a) Commercial Real Estate Loans. Please read below for the secret ingredient many business owners need to acquire the commercial property to grow their business.

You can get 100% financing with no down payment required for the SBA 7(a) commercial real estate loans. You read that right!

Business owners, are you currently renting your property? If given a choice, would you prefer to build equity in your business every month or just be left with canceled rent checks? Did you know there are non-bank business lenders who can pre-qualify you for a commercial real estate loan?  Did you know they can do this literally in five minutes or less with no impact to your credit score?

The question on hand is whether it makes sense to keep your money by investing it in your business? Have you ever wondered how you can do that? Very often, owning is less expensive than renting. By purchasing the property and instead of paying rent, you can build equity in your company, while decreasing your monthly payments.

The result is an increase in cash flow. The additional cash flow then provides an opportunity to grow and expand your business. The free cash can be in the form of other new hires, technology, inventory, or advertising.

Do you have a considerable rental expense? Does it make sense to replace that rental payment with a commercial mortgage finance loan option?  Do I buy Commercial or do I Lease?

Here is the general rule of thumb. If you plan on occupying the same space for at least seven years, the real estate purchase is usually less expensive than the rental.


The cost to purchase commercial real estate is much more expensive upfront versus your rental fees. The bigger question is whether you have the purchase price funds to invest in the down payment for the mortgage without liquidating your net worth?


Let me ask you a question. Are you better off taking money to use as a down payment or investing that money in your business to grow and generate more annual revenue over time? The answer is obvious.

What most business owners don’t know, and the banks won’t tell them, is that an SBA commercial real estate loan is affordable. A $1 million SBA business real estate loan is just under $7,000 a month. Compared to your monthly rent, that could be a steal!

Maybe you have a sizeable upcoming balloon payment with a bank loan? Perhaps you should consider refinancing your mortgage. By refinancing, you might be able to improve your rate, term, or even your monthly payment.

Types of Commercial Real Estate Loans

Can you tell me what the differences between an SBA 504 Loan and the SBA 7(a) Loan and loan amounts are?

The loan size is the first significant difference between the SBA 504 and the SBA7(a). The SBA 504 has a minimum loan size of $125,000 and a maximum of $20M (or more).  The SBA 7(a) has a minimum of $50,000 and a maximum loan of $5 Million.

What Are Current Commercial Real Estate Loan Rates?

The loans offered through the Small Business Administration’s 504 and 7(a) have fixed and variable rates, respectively. (There are some fixed-rate options on the 7(a). The loan terms for the 504 are 20 years for real estate and ten years for an equipment loan. These SBA options are far superior to either a revolving equity loan, equity LOC (line of credit), business lines of credit (LOC), or using business credit cards.

The SBA 7(a) loan is twenty-five years for a commercial property, and up to 10 years for business equipment and an acquisition. The 7(a) loan offers 5 – 7 years for working capital, and a weighted average for mixed-use.

Here is the loan overview, application process, and what you need to know about the loan repayment and the SBA 7(a) Commercial Real Estate Loans.

  • These are 25 Year Fully Amortizing Term Loans
  • No Balloon Payments
  • Minimal Out of Pocket Expenses
  • Build Equity in Your Business

What are the general eligibility and credit requirements for a commercial real estate loan through the Small Business Administration?

  • FICO 675 (no bad credit) Minimum with Good Credit History
  • Cash Flow $1.15 debt service coverage – the debt service coverage ratio (DSCR) measures your available cash flow to pay your current debt obligations.
  • 3 Yrs. Business Tax Returns
  • Interim Balance Sheet
  • P&L
  • Net Operating Income
  • 51% Owner-Occupied Commercial Real Estate
  • Zoned for Commercial or Industrial
  • 90% LTV Ratio
  • 2 Plus Years in Business

Unfortunately, you will not qualify if you are a developer or landlord looking for an investment property loan, and you do not occupy at least 51% of the property.

Unfortunately, you will not qualify if you have a bankruptcy in the last three years. There can be no foreclosures in the previous three years and no prior default on government-backed loans. There can be no outstanding tax liens and no construction on an empty lot.

Lastly, there can be no building a new structure, no investment properties, and no real estate flip projects for private real estate investors.

Once you get pre-approved, the commercial lending process generally goes like this:

  • Personal Financial Information including personal credit score
  • Loan Information including the amount of purchase or refinance
  • Business Ownership information
  • Property Ownership information
  • Business Tax returns – last three years
  • Personal Tax returns – previous three years
  • Year to Date P&L and Balance Sheet

As the loan process moves along, there will be a Letter of Intent. You can also expect to pay a refundable $5,000 deposit application fee. After credit approval, there will be a property appraisal value and an environmental review (Phase I). The closing will have additional Business Documentation, the lease agreement, the loan document preparation, and closing costs.

If all things go smoothly during the application process, expect at least 45 days from start to finish. You can use our loan calculator to know all your costs. Even after the origination fee, packaging fee, and referral fee, these SBA loans, rates, and fees are immensely cheaper than alternative loans from alternative lenders, a traditional bank, or even insurance companies.

Why SB A7(a) Loans are the Secret Ingredient

Many small business owners would love to acquire commercial real estate to grow their companies. As you may know, the Small Business Administration (SBA) is a designated government-sponsored agency.  This agency makes available these businesses commercial real estate loans. You no longer need the private mortgage lenders or mortgage brokers to get your business finance money loan.

Why look for a commercial bridge loan or worse, hard money loans? Especially with low commercial mortgage rates. The SBA 7(a) loan program is especially critical in today’s marketplace.

Operational requirements need capital to grow. Because of the previous credit crisis, there is a dearth of bank and commercial loan lenders that provide commercial real estate loans.

Uncle Sam recognizes that the most significant recession since the great depression stifled economic growth in America, especially with property loans. With many banks teetering on collapse, these commercial loans lenders all but closed their doors to small businesses.

Washington D. C. recognized the need to bolster the economy.  One of the aggressive steps they took was to encourage the use of the SBA programs without dealing with government district offices.

Now, remember, the Small Business Administration doesn’t make the loan. The role the SBA plays is to facilitate the financing and make it somewhat easier for the bank or lending institution to get you approved.

The SBA accomplishes this by guaranteeing up to 90% of the business loan secured by the banks or those lending institutions that specialize in financing by the SBA.

Another huge advantage of the SBA real estate loan is the terms. Quite frequently, commercial real estate loans only have terms of 5 to 10 years. This program by the SBA enables you to amortize the loan over 20 to 25 years. These terms, of course, are a tremendous relief on the cash flow of any business.

When you combine the fact that you can do this without a down payment, you can see how this is a powerful one-two punch. You can keep your cash working for you while reducing your monthly payments. Think about it. The majority of conventional commercial real estate loans offered today require a substantial down payment. Traditionally the LTV (Loan to Value Ratio) is 90%. However, many institutions have cut their LTV from 75% down to 58% to 63%.

Did you know that you can receive a 25 year fully amortizing repayment term loan with no balloon payments? With 100% financing, you’ll have minimum out of pocket expenses. This funding means rather than tie up your capital in a building you can be putting it to work growing and expanding your business.

You are currently looking at variable rates.  These rates are approximately between 5.50% and 6.75% and spread (prime rate plus) between 1.5% to 2.75% (and are subject to change).

Imagine all these benefits plus a 3-year prepayment penalty declining from 5% in year one to 1% in year three. The qualifications are simple. It would be best if you have a FICO personal credit score of 675, and you must occupy at least fifty-one percent of the property.

You must be prepared to have this loan 100% collateralized. This type of financing is not an unsecured business loan. To secure the loan, you’re looking at all your inventory, receivables, and equipment encumbered for the life of the loan. On top of this, you will have a blanket guarantee extending to your personal residence. Our suggestion is to speak to a Sunwise Capital rep and call 888.456.9223 for additional information or Apply Now.

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