Commercial loans
A commercial loan finances property used for business or to earn income, from an office or warehouse to an apartment building of five or more units. Lenders weigh what the property earns and how the business performs.
Business owners and investors buying, refinancing or building commercial property, including apartment buildings of five or more units.
What it covers
Commercial property purchase and refinance
For offices, retail, industrial and mixed-use buildings, whether your business occupies them or you lease them out. Terms are usually shorter than on a home loan, and the lender looks closely at the property's income and condition.
Apartment buildings
A building of five or more units is financed as commercial property rather than as a home. The lender underwrites the building's rent and running costs, not only your own income.
SBA-backed loans
Loans made by lenders and partly backed by the U.S. Small Business Administration, for a business buying, building or improving the premises it operates from. The 7(a) and 504 programs are the two used most for property, and the business has to occupy most of the building.
Bridge loans
Short-term finance to buy, reposition or stabilise a property before longer-term financing is in place. Quicker to arrange and more expensive, and the lender wants a clear plan for how it will be repaid.
Commercial construction
Finance for building from the ground up or for major renovation, released in stages as the work is inspected. Lenders ask for detailed plans, a budget, a qualified contractor and evidence of relevant experience.
What a lender will ask for
- Financial statements and tax returns for the business, and usually for each owner too.
- For a property that earns income, the rent roll, leases and operating statements, so the lender can set what it earns against what it costs.
- An appraisal, and often environmental and property condition reports.
- A larger down payment than most home loans ask for, and cash reserves.
- Owners who sign for the loan personally, which many commercial lenders require.
What it offers
- Commercial lenders, SBA-backed programs and short-term finance compared side by side, rather than the one product a single bank offers.
- A loan sized on what the property earns, which can suit an investor whose personal income tells only part of the story.
- Guidance on the structure as well as the rate: the term, the repayment schedule, prepayment terms, and when the loan would need refinancing.
What to weigh up
- Many commercial loans have a shorter term than the schedule they are repaid on, leaving a balance due at the end that has to be refinanced or paid off.
- Many carry prepayment penalties, so paying off or refinancing early can cost more than expected.
- Rates are often variable, or reset after a set period, so the payment can change.
- Commercial loans are made for business purposes and do not carry all the consumer protections that apply to a home loan. Read the terms closely, and ask us about anything unclear.
- Fedrate Mortgage is not affiliated with, nor acting on behalf of, the Small Business Administration or any other government agency.
Related loan programs
Start with a pre‑qualification request
Tell us what you want to do and where, and we come back with options compared across multiple wholesale lenders. A pre-qualification request starts it, and nothing is a commitment until a lender has reviewed your file.