• Preston Morris

Small Business Financing Youngsville NC


How to get a commercial real estate loan

Commercial real estate loans are generally used to purchase or renovate commercial property. Lenders usually require that the property be owner-occupied, meaning that your business will have to occupy at least 51% of the building. To get a commercial real estate loan, you’ll need to decide on the type of commercial loan you need — depending on the property and business — and then narrow down your lender options.


What do lenders look for?

Lenders typically have three sets of requirements before granting a commercial loan to your small business. These requirements likely pertain to your business’s finances, your personal finances and the property’s characteristics. Follow Us!


Business finances

Typically, commercial real estate loans require a lot of scrutiny — small businesses are considered risky, and many don’t end up succeeding. Banks and commercial lenders will need to look over your books to verify that your business has the cash flow necessary to repay the loan.

A lender is likely to calculate your company’s debt service coverage ratio, which is defined as your annual net operating income (NOI) divided by your annual total debt service (the amount you’ll have to spend paying back principal and interest on your debt). A ratio of 1.25 or greater is a typical requirement. For example, if your business is debt-free and applies for a $100,000 commercial real estate loan, the lender will want to see that you generate a NOI of at least $125,000.


Business credit

The lender will also check your business’s credit score to gauge your access to a commercial loan and the terms — interest rate, payback period, down payment requirement — that will apply. The minimum required FICO Small Business Scoring Service (SBSS) credit score is 155 for the SBA 7(a) loan, the government agency’s flagship loan program, although there are plenty of exceptions that allow small businesses to get a loan with a score lower than the minimum.

Your small business should be structured as a business entity, like a limited liability company or an S corporation. A real estate loan to a sole proprietorship would be considered personal rather than commercial, which would put your personal wealth at risk if you default on the loan.


How do I get a commercial real estate loan?

  1. Determine which commercial building or property you want to purchase.

  2. Determine which real estate loan type works best for your needs.

  3. Check your credit score.

  4. Gather all the requested documents and lender information.

  5. Apply for a commercial real estate loan.

This first mortgage secured by commercial real estate offers:


  • Loans from $5,000 to $2,500,000

  • Fixed- and variable-rate options

  • Competitive pricing and a low annual fee

  • A discounted rate when you use our Automatic Payment Option

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