Commercial Lending 101: What Every Business Owner Should Know Before Applying

Send HEPi
Apr 9
3 min read

Updated: Apr 11

Are you launching a startup, expanding your location, or purchasing equipment, commercial lending can be a powerful tool to grow your business? With so many loan types, terms, and lenders out there, the process can feel overwhelming.

We’re breaking down the basics to help you make smart, confident decisions when it comes to financing your business.

What Is a Commercial Real Estate Loan?

A commercial real estate loan is a financing option for businesses or investors looking to purchase, refinance, or develop commercial properties. Unlike residential loans, these loans are specifically designed for income-generating properties like office buildings, retail spaces, industrial facilities, and multi-family units.

Commercial real estate loans typically offer higher loan amounts, longer terms, and more flexibility compared to traditional personal loans, making them ideal for investors looking to grow their portfolios.

Common Types of Commercial Real Estate Loans

There are different types of commercial real estate loans, each suited to specific goals. Here's a quick overview:

Term Loans – Traditional loans offering lump sum funding with fixed payments over a set period. Ideal for purchasing or refinancing established properties.
Bridge Loans – Short-term loans used to "bridge" the gap between purchasing and securing long-term financing. Perfect for quick acquisitions or renovations.
SBA 504 Loans – Government-backed loans designed for small business owners who want to purchase or renovate commercial properties.
Construction Loans – Financing for the construction of new buildings or major renovations. Funds are typically disbursed in stages as milestones are met.
Permanent Commercial Loans – Long-term financing options for income-producing properties such as office buildings, retail centers, and multi-family complexes.

What Lenders Look For

Lenders evaluate several key factors when considering a commercial real estate loan:

Property Value – The value of the property you're financing plays a significant role. Appraisals help determine the property’s market value.
Credit History – Both your personal and business credit history will be assessed to gauge your ability to repay.
Cash Flow – Can the property generate enough income to cover the loan payments? Lenders will look at your projected rental income and existing cash flow.
Down Payment – Typically, you'll need to put down at least 20% of the property’s value, but this can vary depending on the loan type and your financial situation.
Experience – Lenders favor borrowers with experience in real estate, as they are seen as less risky.

How to Prepare for a Commercial Real Estate Loan Application

Preparation is key to securing the right loan. Here’s what you need:

Business tax returns (for established businesses); typically 2 years
Profit & loss statements, balance sheets, and cash flow projections
Business plan, especially if you are developing or flipping properties
Property details, including appraisals, surveys, and purchase agreements
Personal and business credit reports

When Should You Apply for a CRE Loan?

Timing matters. The best time to apply for a commercial real estate loan is when you’re clear on your property goals and have the financials to back it up.

Signs you're ready:

You have a specific property or development in mind
Your business or property has consistent cash flow
You need to lock in a rate before market changes
You’re ready to invest in growth and expansion

Securing a commercial real estate loan is more than just getting financing, it’s about building a relationship with a lender who understands your vision. With the right loan at the right time, your real estate investments can open doors to new opportunities.

Ready to explore your financing options?

Schedule a consultation with our team today. We’ll guide you through every step of the process and help you find the best loan for your commercial real estate needs!