Commercial FAQ

Commercial lending can be used to finance a variety of properties including office buildings, retail spaces, industrial properties, multi-family residential units, hotels and mixed-use developments. Each property type may have different lending criteria and terms.

Lenders generally require detailed information to assess the risk of a commercial mortgage. This includes:

• A comprehensive business plan
• Financial statements for the business (typically 2–3 years of history)
• Personal financial statements of the owners
• Details about the property (appraisal, location and condition)
• Proof of down payment and source of funds
• Credit history of the business and owners

The down payment required for a commercial mortgage typically ranges from 25% or greater of the property’s purchase price. The exact amount depends on the type of property, the lender’s policies, the financial strength of the borrower and the debt-servicing ratio.

Interest rates for commercial mortgages vary based on factors such as the lender, the type of property, the loan amount and the borrower’s credit worthiness. Commercial mortgage terms usually range from 1 to 5 years, with amortization periods often extending up to 25 years. Fixed and variable rate options are available.

There are two fees attached to commercial lending: a lender fee and a broker fee. Fees are determined by the complexity and size of the deal. Fees range anywhere from 0.50% to 1% of the loan amount for both fees.

The primary differences between commercial and residential mortgages include:

• Down Payment: Commercial mortgages typically require a higher down payment.
• Interest Rates: Commercial mortgage rates are generally higher than residential rates.
• Documentation: Commercial lending requires more extensive documentation and financial scrutiny.
• Risk Assessment: Commercial loans are evaluated based on the income potential of the property and the business, whereas residential loans focus on the borrower’s personal income and credit history.