COMMERCIAL MORTGAGE LOANS

Who Benefits from a Commercial Loan and How It Works?

A commercial real estate loan is specifically designed to help businesses and investors acquire, develop, or improve commercial properties. Unlike residential loans aimed at individual homeowners, these loans cater to properties intended for business use, including office buildings, retail spaces, warehouses, multifamily housing, and hotels.

Who Can Benefit from a Commercial Loan?

These loans are ideal for:

• Businesses looking to purchase or expand their physical locations.
• Investors seeking to acquire income-generating properties.
• Developers focused on new construction or major renovations.
• Property owners looking to refinance or restructure existing debt.

How Commercial Loans Work

A commercial real estate loan functions differently from residential loans and involves the following elements:

• Purpose: Funds can be used to purchase property, refinance an existing loan, develop land, or renovate commercial spaces.
• Lenders: Available through banks, credit unions, private investors, or CMBS (Commercial Mortgage-Backed Securities) lenders.
• Loan-to-Value (LTV): Lenders typically finance a percentage of the property’s appraised value—commonly up to 80%. For example, on a $1 million property, a lender might loan up to $800,000.
• Interest Rates: Rates can be fixed or variable and are generally higher than residential mortgage rates due to the higher risk.
• Repayment Terms: Terms usually range from 5 to 20 years, often with balloon payments at the end. Some loans may feature longer amortization schedules than their terms.
• Fees: Borrowers can expect origination fees, appraisal costs, and potential prepayment penalties.
• Collateral: The commercial property itself serves as collateral. In case of default, lenders can foreclose on the property.
• Qualification: Lenders assess creditworthiness, business profitability, and the property’s potential income. Key metrics include the Net Operating Income (NOI) and Capitalization Rate (Cap Rate) to determine property value and loan limits.
• Recourse vs. Non-Recourse Loans:
• Recourse Loans: The borrower is personally liable for repayment.
• Non-Recourse Loans: Lenders can only recover the property as collateral in case of default.

For Construction Loans

Funds are released incrementally based on a draw schedule tied to construction milestones, ensuring steady progress and financial oversight.

Why Choose a Commercial Loan?

Commercial loans provide the capital necessary to seize opportunities in the business real estate market, whether acquiring new properties, expanding portfolios, or undertaking large-scale renovations. At SL Global, we work closely with borrowers to ensure transparent, efficient financing tailored to their unique needs, helping them maximize the potential of their investments.