Business Banking. Commerical Real Estate

Businesses that want to purchase the building they are occupying or planning to occupy can take a loan similar to home loans. The loan is secured by the commercial building. There is typically an occupancy percentage requirement. For example, the bank may ask for at least 50% of the property to be occupied by the business. Shopping centers or apartment complexes will often not qualify for failing to meet the occupancy requirement. There is usually a 10-30% downpayment requirement. There are normally 2 types of payment terms:

• Balloon payments: smaller payments are made in the beginning, then one large payment pays off the debt.

• Straight Amortization: payments are divided into equal monthly payments. It typically takes longer to pay off this way.

When making a decision on a commercial real estate the lender will look at the following:

• The revenue of the business

• Net profit

• Length in business (typically at least 3 years under the same ownership is required)

• Assets of the business (typically the business must have some reserve working capital to qualify)

• The business credit score

• The credit score of the guarantor(s)

• The assets of the guarantor(s)

• The value of the property

• The type of the property

• The occupancy rate

• The downpayment amount

• The industry of the business. High risk industries will be scrutinized more heavily or be outright rejected.