Commercial Real Estate Lenders
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Starting and growing a business takes space—and space takes money. Whether you’re looking for office, retail, industrial, or a variety of other commercial properties to launch or expand your business, you’ll likely need a loan to seal the deal. After all, the average cost of commercial land and property for sale in Indiana is $717,952 (according to Land.com), which is a lot for small businesses to come up with—especially with other financial demands like equipment and staffing costs.
In this guide, we’ll cover many of the basic requirements for acquiring a commercial real estate loan, including average interest rates, down payments, and required credit scores.
What Are Current US Commercial Loan Rates for Real Estate?
Commercial real estate loan rates vary depending on the purpose of the loan, the lender, and the borrower’s credit standing. As a starting point, average commercial loan rates in the US (as of October 2024) are:
- Commercial Retail: 6.78%
- Industrial: 6.78%
- Office: 6.78%
- Self Storage: 6.78%
- Medical: 6.78%
- Hotel: 7.50%
- Motel: 7.50%
Economic trends also impact commercial real estate rates, so it’s important to get current rates from the lenders you’re considering for your next investment.
On average, credit unions tend to offer more favorable loan rates than commercial banks and online lenders. Because credit unions are nonprofit organizations and owned by their members, they can prioritize responsive customer service and lower interest rates. Ready to see what else credit unions can offer your business? Explore our commercial real estate loan options and speak with one of our experts to learn more.
What Is a Good Rate on a Commercial Loan?
The best commercial real estate loan rates are the lowest that are available to you. Which rates lenders are willing to agree on depend on your credit score, the size of your down payment, the type of property you intend on investing in, and economic conditions. While researching rates, it’s vital to anticipate the impact that different loans can have on your ROI. After all, you’ll have to balance the mortgage, interest, insurance, turnover, repairs, renovations, and so much more.
If you need additional insights, or help getting started with an online application, connecting with a commercial lender is a great way to make sure you get the details right.
What Percent Down Do You Need for a Commercial Loan?
A commercial real estate loan down payment typically ranges between 10% and 30% of the property’s value. Ideally, borrowers would be able to put down at least 25% for more favorable interest payments.
When considering the amount you want to use as a down payment, it’s important to note that commercial loans have a higher loan-to-value (LTV) ratio than traditional loans. In other words, borrowers for commercial properties tend to take out loans that cover a higher percentage of the property’s value than other types of borrowers. Putting down a larger payment up front will lower the LTV ratio, which will reduce mortgage payments (and interest payments) in the long run.
Working with a commercial lending expert can help you make informed decisions when it comes to calculating down payments. Get in touch today or visit your local IMCU branch to get started.
What Credit Score Do You Need for a Commercial Real Estate Loan?
Preference for commercial real estate loans starts at a credit score of 680 or higher. While it is possible to secure a loan with a lower credit score, it will be more difficult, and you will likely be subject to higher interest rates.
According to Business News Daily, borrowers should be prepared with the following qualifications (in addition to a 680 minimum credit score) when applying for a commercial real estate loan:
- Ability to take on a loan with a 6.9% interest rate
- Commit to a down payment of at least 25% of the property’s value
- Agree to loan terms of 5-10 years, with payments based on up to 25-year amortization
- Minimum debt-service coverage ratio of 1.25
Loan requirements will vary from lender to lender, so check with your local institutions for exact requirements.