Multi-unit | multi family financing
Purchase & refinance

Application, get pre-approved | Rates

Commercial mortgage loans, all 50 United States
Choice Finance® finances all types of commercial loans.  We are very good at, and particularly look forward to helping you with your multi-unit property financing.  These are buildings with 5 or more units (contact one of our residential loan officers for financing on 2 unit, 3 unit, and 4 unit properties).  Minimum guidelines for multi-family/multi-unit real estate generally include:

• Rate lock fee of 1%. Refundable at closing only
• Escrow of taxes and insurance required
• $300 reserves per unit required.
• Property must be located in an area with population > 30,000
• 80% LTV on 5, 7, 10, 15 year terms
• 75% LTV for 6 month and 3 year terms
• Loans up to 10 million
• rate is fixed for 3, 5, 7, 10, or 15 years and then adjusted over the 6 month LIBOR
  *these are general guidelines. You must meet other criteria to qualify, and above criteria are subject to change at any time without notice.

Insight on qualifying for a commercial loan

To get started, please complete our no-cost, no-obligation commercial loan application. This enables our Commercial Loan Officer to know the kind of loan you need and understand your financial scenario.

We can also help with commercial real estate loans for mixed-use, office, church, hotels/motels, apartment buildings, condo conversions, warehouses, agricultural, land loans, and beach property.  As well as office buildings, office condos, private school construction, retail buildings, shopping centers, strip malls, storage unit parks, 1031 exchanges (Starker Exchange), and reverse 1031 exchanges.

Commercial Loans to: individuals, corporations, trusts, partnerships, and limited liability corporations (LLC's)

Loan types: adjustable rates (ARM's), construction loans, rehab, fixed rate loans, venture capital, working capital, investment, 2nd homes, good LTV's, large 2nds, hard money, no doc, quick cash, equity lender, interest-only, loans as high as $50 million, up to 30 years.

Insight on qualifying, and the basics of commercial loans vs. residential
Entrepreneurs seek commercial loans for a variety of reasons – perhaps they own a business and want to acquire real estate for the business, or they plan to acquire a business with real estate (such as restaurant or a retail establishment). In other cases it may be investment property to lease or a business with no property at all. In all cases, the entrepreneur should understand some of the basic differences between commercial loans versus the residential loans they may have more experience with.

Most likely, you have been through the process of getting a mortgage on your home and possibly even refinanced a couple times. You are therefore accustomed to providing copies of pay stubs, having verifications of income and employment, having your credit report reviewed, and so forth. You are probably also familiar with the lender looking at items such as debt-to-payment ratios and loan-to-value.

In a commercial loan however, lenders often look to another set of criteria. Certainly such items as the borrower’s credit and loan-to-value will be important, however the following are some of the other key areas that will be important to the lender.

Cash Flow Coverage
Commercial properties are meant to create income and it is this income that repays the loan. Income may come from the business that occupies the property, from tenants that lease the property, or from a business with no property. In any case, one of the most important factors to the lender will be the ability for the business to repay the loan. As they analyze this, the lender will look to the amount of cash available to service the debt after paying the owner and covering all operating expenses. An example of how this could be calculated is as follows:

-Earnings from the business/property (net income as reported on tax return)
-Plus depreciation expense from prior years (this is not cash)
-Plus interest on any loans to be refinanced (this will change after the new loan in made)
-Plus the owners salary and discretionary expense (i.e. the car the business pays for)
-Minus the amount the owner needs to cover their personal expenses (see next section)

The result is the amount of cash the business has to service the debt. Most lenders will want this amount to be somewhere around 1.20 – 1.35 times the amount of the principal and interest payments. For example, if the principal and interest payment were $20,000 per month (or $240,000 per year), then the annual cash flow of the business with a 1.25 coverage cushion, would have to be $300,000.

Owner’s Income & Expenses
With a commercial loan, the owner’s income and expenses come into play very differently than they would in a residential mortgage. First, the owner’s personal income is not used to repay the loan. Therefore the debt-to-income ratios and other personal income requirements often don’t exist. However, the lender will want to see that the owner can cover their personal expenses and leave the business with enough to service the debt. If the owner has other income sources, then they may be able to use the entire cash flow of the subject business or property to service the debt. However, if the owner operates the business and the business produces the owner’s personal income, then the lender will want to see that the business or property can pay the owner enough to cover their personal expenses (home mortgage, bills, etc.) and then have enough left over to cover the commercial loan payments.

Experience
When making a business loan, whether it is to acquire a business or to buy real estate for a business, the lender will often look at the experience of the borrower. If we assume the borrower is an entrepreneur, then we can be sure that the bank will want to be comfortable that they have sufficient experience in the industry of the business receiving the loan. For example, if the loan is to acquire a restaurant with a building, the lender will favor a borrower with many years of management experience in the restaurant business over a general entrepreneur with little industry specific experience.

Business Plan
Another area of importance will be the Business Plan. The lender will want to see a logical, well though-out, realistic plan for how the business and property will make money, whether this is continuing existing revenue into the future, or growing revenues.While we have only scratched the surface here, one can easily see that lenders look at very different things when considering commercial loans. Assuming you already have some experience in the industry, if you pay close attention to the business plan, the revenue and profit model, and the ability for the business and property to generate enough income to repay the loan (with the coverage cushion), then you will be on your way to a successful commercial loan.

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Application, get pre-approved | Rates