A CRE loan is a loan that helps business owners finance the purchase or renovation of commercial property. This commercial property can vary from office buildings to retail stores, hotels, restaurants, and almost any type of space used for business. Most CRE lenders require that the building is at least 51% owner-occupied meaning they are not suitable for those looking to simply invest in real estate with no intention of using the property for their own business. If you are looking to simply invest in real estate, a commercial mortgage or even a personal loan might be the right choice for you.

There are several types of lenders and lending institutions that offer CRE loans. Let’s start with the type of loan listed above - commercial loans.

Commercial loans are similar to mortgages in that they are secured by the property, and the property itself is the collateral. This is unlike a personal loan which is typically unsecured and requires no collateral. These types of commercial lenders each have their own requirements of business owners and you can see these clearly laid out in the chart above.

Pros: flexible requirements, fast approval, low fees, easy to apply from anywhere.

Cons: often unavailable to new businesses, many are short-term loans

SBA loans are another way of securing financing for commercial real estate. There are two relevant types of these government-backed SBA loans, SBA 504 loans, and SBA 7(a) loans. The SBA 504 program can be used for both equipment financing and real estate. For real estate, 50% of the loan comes from a bank, 40% comes from a Certified Development Company and the final 10% must be used by you as a down payment.

The SBA 7(a) loan program is also government-backed and allows you to borrow up to $5 million through an affiliated lender. These loans max out at a 25-year term and the rates are based on the prime rate plus an additional interest rate.

Pros: low rates, flexible terms

Cons: must meet SBA standards, may require down payment, approval takes time.

Bridge loans are another financing solution for those who are in need of cash in the short-term while they wait for longer-term financing. The rates of a bridge loan are often higher than other loan types but they do allow for short repayment windows ranging from 6 months to 3 years.

Pros:Close quickly, short repayment terms

Pros:Cons: Higher rates, requires down payment

Assuming you meet the minimum requirements of multiple lenders there are several other factors to look out for when choosing a CRE lender.

Timing is often a big concern, especially in competitive commercial markets. The time it takes to approve the loan and then receive the sum could mean the difference between securing the property or having it fall to a competitor. Most commercial lenders are able to finalize everything within only a few days but if you need something sooner, like pre-approval, it’s best to check with the lenders directly.

Customer service is another factor especially for those who are new to the lending world. It can be extremely helpful having a friendly face to turn to when you have questions and/or concerns about the loan process. Some lenders are simply middlemen and don’t offer much in the way of customer service, but others like LendingTree are huge institutions with flexible phone hours and comprehensive guides.

Lastly, it may be the most obvious one but rates is obviously the biggest factor when it comes to choosing a CRE lender. Since rates are always changing and depend on the specifics of each business we are unable to display rates alongside the requirements of each lender. For this reason, we recommend that you apply to several lenders and compare the rates you are offered.

The initial process of applying for a CRE loan is extremely simple and straightforward. It can even be done on your phone and you won’t need to upload any documents at this stage. All you’ll need to provide are details about your business, the type of property you intend to purchase, and some contact information so the lender can reach out to you.

Once the initial process is complete, a representative from the lender will reach out to you and request several key documents including:

• A purchase contract for the property
• A business plan
• Income verification
• Tax returns
• Documentation of down payment sources
• Personal financial statements
• A blueprint or architectural designs