COMMERCIAL REAL ESTATE
At RLJ Financial Consults, our experienced partners provide financing for commercial owner-occupied and investment properties, for construction to permanent projects, purchase money, and refinancing of an existing property.
The information below is an overview of the various types of real estate financing we assist our clients in securing for their particular commercial real estate project(s).
I. SBA 7(a) Loan
Loan Amount: Up to $5MM
Loan Term: 25 Years
Down Payment: 10%
Time to Funding: 60 – 90 Days
Personal Credit Score: 680
Time in Business: 3 years
Prepayment Penalty: 1%-5% of the loan amount during the first five years of the loan
DSCR: 1.25
Owner-Occupied Loan: 51% of the space must be occupied by the operating business or 80% of the space must be occupied by the operating business for construction to permanent deals
SBA Guarantee Fee: 0% – 3.75% (on SBA amount)
Closing Costs: 2% – 5%
Appraisal Fee: $475+
These fees are typically taken directly out of the loan and don’t come out of pocket.
II. CDC / SBA 504 Loan
Loan Amount: Up to 90% of Purchase Price
Loan Term: 10 – 25 Years
Down Payment: 10%
Time to Funding: 60 – 90 Days
Credit Score: 680
Time in Business: 3 Years
Prepayment Penalty: 1%-5% of the loan amount during the first five years of the loan
DSCR: 1.25
Owner-Occupied: 51% of the space must be occupied by the operating business or 80% of the space must be occupied by the operating business for construction to permanent deals
SBA Guarantee Fee: 0% – 3.75% (on SBA amount)
CDC Processing Fee: 0% – 1.5% (on CDC portion)
Appraisal Fee: $475+
These one-time fees are typically taken directly out of the loan
It’s important to note that the loan is actually financed by two parties:
– A traditional bank or lending institution
– A Certified Development Company (CDC)
This causes the commercial real estate loan to have two loans. The first loan is financed by an approved bank up to 50% of the purchase price. The second loan is financed by a certified development company (CDC) up to 40% of the purchase price. The remainder is the borrower’s down payment.
Further, CDC / 504 loans have the following unique requirements:
- Company’s net average income must be less than $5,000,000 for the previous two years
- The company cannot have a tangible net worth greater than $15,000,000
- Loan amount cannot be more than the personal assets of the business owner
- Finally, in order to qualify for a CDC / 504 loan for commercial real estate, companies must create or retain 1 job for every $65,000 issued.
III. Traditional Bank Mortgage
Loan Amount: Up to 75%-80% of LTV
Loan Term: 5 – 25 Years
Down Payment: 20%-25%
Time to Funding: 60 – 90 Days
Credit Score: 680
Time in Business: 3 Years
Prepayment Penalty: 1%-5% of the loan amount during the first five years of the loan
DSCR: 1.25
Owner-Occupied or Investment Property: 51% of the space must be occupied by the operating business or for investment property the tenant(s) must have a minimum 5 year lease in place and 100% of the property must be leased
IV. HARD MONEY LOAN
A commercial hard money loan is a short-term loan used to purchase and sometimes renovate an owner-occupied commercial property before refinancing to a long-term mortgage. Commercial hard money loans are similar to commercial bridge loans in that they help businesses close fast and offer interest-only payments throughout the life of the loan.
Maximum Loan Amount: Up to 80% LTC, Up to 90% LTV
Minimum Down Payment: 15% – 35% of Purchase Price
Interest Rates: 8% – 13%
Origination Fees: 2% – 5%
Closing Costs: 2% – 5%
Prepayment Penalty: 1%
Typical Loan Term: 1 – 3 Years
Time to Approval/Funding: 10 – 15 Days
Credit Score: 680+
Prior Commercial Projects:1 – 3
Lender Fees: 2% – 5%
Closing Costs: 2% – 5%
Appraisal Fee: $475+