Where Can I Find a Good Commercial Loan?

If you need a commercial real estate loan, you will need to apply to either a life insurance company, a conduit, a commercial bank, a credit union, or a hard money lender. These are the types of commercial lenders actively making commercial loans today.

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Life insurance companies have, by far, the lowest interest rates on commercial loans; but few mortals can qualify. To qualify for a commercial loan from a life company, the commercial loan must usually be for at least $5 million, the property has to be young, if not brand new, it has to be fully-leased, and your loan-to-value ratio cannot usually exceed around 53%. Life companies do close commercial loans, but in my 33 years in the commercial mortgage business, I have never successfully closed a commercial loan with a life company. They are immensely picky.

Conduits have the cheapest, fixed rate commercial loans of all of the commercial lenders who actually close loans for mortals like you and me. Conduits are mortgage banking companies that originate large, fixed rate commercial loans according to very strict guidelines. These loans are eventually placed into pools and securitized.

The good news is that conduits offer very low interest rates on commercial loans, and they will sometimes stretch to 65% (68%?) loan-to-value. The bad news is that most conduits prefer loans over $5 million, and all conduit loans have prepayment penalties large enough to choke a horse.

Commercial banks make most of the commercial mortgage loans for regular guys like you and me. The best place to start is your own bank. The only commercial lender who can make you a cheaper commercial loan than your own bank is ... your mother.

If your own bank won't make approve your commercial loan, try some of the commercial banks located close to your commercial property. I like to plot the subject property on Yahoo Maps and then ask Yahoo to display all of the nearby banks. Banks greatly prefer to lend close to one of their offices.

Don't forget about credit unions. Prior to 2011, credit unions almost never made commercial loans. Since 20111, many credit unions have become quite active in the commercial loan business. In less than three years, they have seized over 3% of the commercial mortgage market. Look for credit unions located close to the subject property. Like all commercial lenders, credit unions greatly prefer to make loans close to one of their offices.

Lastly, if you simply need a commercial loan, and every bank in town has brushed you off, consider applying to a private money (hard money) commercial lender, like Blackburne & Sons. Hard money lenders are much cheaper today than in the past, and they are hungry to make you a commercial loan.

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