Copyright (c) 2008 Donna Elizabeth Lewczuk

Commercial mortgages are available through banks, commercial mortgage companies and private lenders. Commercial mortgage rates vary as widely as residential mortgage rates. Traditional banks offer some very low rates. However, due to their restrictive lending criteria, they are prevented from making commercial mortgages for many kinds of commercial properties. Gas stations, with or without convenience stores, for example, can be difficult to obtain commercial mortgages for. Commercial mortgages can also be difficult to obtain from traditional banks if you don’t have excellent personal and business credit scores.

Hard money commercial mortgages are also available through private lenders. Unlike traditional banks, private lenders have more flexible lending criteria. Also known as hard money lenders, private commercial mortgage companies focus more on the current value of a commercial property than on your personal financial package.

Private lenders are often able to fund a commercial mortgage if there is a clear picture of how the loan will be paid back. When determining whether to fund a commercial mortgage, private lenders will often look at the ratio of income to operating expenses. Unless a borrower has repeated defaults and bankruptcies, private lenders are not as concerned if the borrower has less than perfect credit.

When applying for a commercial mortgage, be prepared to provide your commercial mortgage company, be it a bank or a hard money private commercial mortgage lender, with the following:

- A completed standard commercial mortgage loan application, which includes a personal and business balance sheet
- A description of the use of proceeds of the commercial mortgage you are seeking
- A description of the property
- The current value/purchase price of the property
- The cost of improvements you will make to the property
- An estimate of the property’s value after improvements
- A repayment plan for the commercial mortgage/hard money loan
- For a hard money loan, provide an exit strategy for the commercial mortgage
- will you refinance this commercial mortgage with a traditional bank after making improvements or alterations to the existing property or some other scenario?

Owners considering a commercial mortgage refinance will find many unique loan programs. Specialists of commercial mortgage refinancing offer some of the best loan options available, most of which local banks simply don’t have. Refinancing your commercial mortgage is not an act exclusively reserved for the time your commercial mortgage matures. There are some great reasons for refinancing your commercial mortgage prior to this (see the article “Why a Commercial Equity Loan”).

Now, given the current the state of the capital markets its more important than ever to work with seasoned professionals. Lender guidelines and underwriting parameters are changing rapidly as banks try to protect themselves. Options for commercial mortgage refinances, though still broad, are getting harder to determine and close. Just as important it is key to know not only which lenders are offering the lowest rate and fees but which are still actively funding loans. A good, seasoned mortgage professional will know who these lenders are.