Frequently Asked Question Related to Commercial Lending
What is a commercial Loan?
How does a commercial loan differ from a residential loan?
What is a minimum down payment for a commercial loan?
Does qualifying for a commercial loan require that I have any kind of experience?
What kind of commercial properties can HomeStart finance?
Is a real estate agent necessary for a commercial loan?
What are the key requirements to qualify for a commercial loan?
Does HomeStart require a lot of documentation for a Commercial loan?
If I do business at home, can I qualify for a commercial loan?
Do I need to be incorporated to get a commercial loan?
Why should I use HomeStart Capital to do my commercial loan?
How long does the loan take to complete?
How do commercial rates compare to residential loans?
What is a commercial Loan? back to top
A commercial loan finances the construction, purchase, or refinance of residential property greater than four units or finances business properties such as retail or medical offices.
How does a commercial loan differ from a residential loan? back to top
The biggest differences between Commercial loans and Residential loans are the loan terms, interest rate, loan-to-value and criteria upon which the decision is based. Residential loans typically have fixed rates and loan terms that last for 15, 20, or 30 years. However, most commercial loans have short lived loan terms that last between 5 to 10yrs. Although the interest rate is fixed during this period most commercial loan terms will require that the note come due after an interim period of 5 to 10years to ensure the viability of the business and repayment. Commercial Interest rates tend to be higher than residential rates and is typically tied to the US prime rate (i.e. - Prime Rate + 1 or Prime Rate + 2% the exact rate will depend on the level of risk). Loan-to-value for commercial is also lower than residential and will typically require 10% to 20% down payment or equity. Lastly, whereas residential loans qualifications are mostly dependant on the borrower’s individual ability to pay, this emphasis shifts in commercial loans towards the viability of the business itself and the collateral value of the business’ real estate.
What is a minimum down payment for a commercial loan? back to top
Commercial loans will require at least a 10% down payment or equity. However, it is typical that commercial loans will require between 20% to 35 % down payment depending on the property, business, viability of the business and financial profile of the investor / owner.
Does qualifying for a commercial loan require that I have any kind of experience? back to top
No.
What kind of commercial properties can HomeStart finance? back to top
Please see our list of property types.
Is a real estate agent necessary for a commercial loan? back to top
NO. It is not required to have a real estate agent to obtain a commercial loan however it is always a good idea to consult a commercial real estate agent and/or an attorney to ensure your interest are well represented and taken into account when negotiating with the seller.
What are the key requirements to qualify for a commercial loan? back to top
HomeStart commercial loans are mortgaged against real estate so whether you are buying a business or refinancing a commercial loan, real estate will be required. In addition, if you are buying a buying a property, be prepared to put down at least a 10% down payment or if you are refinancing a loan have at least 10% equity in the property after closing. Lastly, the loan amount cannot fall below $100,000.
Does HomeStart require a lot of documentation for a Commercial loan?
back to top
No. Using HomeStart’s Fast-track commercial lending HomeStart can provide up to 90% lending with as little as property pictures, signed loan application, appraisal money and credit report. No requirement for income documentation, tax returns, property or business tax returns, tenant approvals, or corporate documentation.
If I do business at home, can I qualify for a commercial loan? back to top
YES. Many times individuals run their business out of their home such as doctors, attorneys, dentist, carpenters, etc. If the home is not zoned specifically for residential use and the home is in an area where it is customary to have home-based businesses the answer would be yes. However, the determination would be case by case.
Do I need to be incorporated to get a commercial loan? back to top
No. Incorporation is not a requirement to obtain a commercial loan. Commercial loans can be underwritten under a specific person’s or investor’s name and of course under a corporate umbrella if so desired.
Why should I use HomeStart Capital to do my commercial loan? back to top
Many small businesses are profitable and stable yet most established banks will push away small business commercial loans due to the perceived risks and the inability of small businesses to prove their business income. HomeStart can help small to medium business obtain the financing through its network of business investors and help small business navigate the complicated world of financing.
How long does the loan take to complete? back to top
Depending on the type of transaction the process can take anywhere from 45 to 60days from start to finish. Some purchase transactions or construction commercial lines, because of their complexity, can on occasion take up to 90days.
How do commercial rates compare to residential loans? back to top
Commercial Interest rates tend to be higher than residential rates and are typically tied to the US prime rate (i.e. - Prime Rate + 1 or Prime Rate + 2% the exact rate will depend on the level of risk). In addition, Commercial interest rates are typically quoted on a 5 to 10yrs term. Interest rates can be fixed during this period but typically will be determined on a variable formula such as Prime rate + margin.