Basics of Commercial Loans

Commercial loans come in all shape and forms. However, you could identify three main categories:

1. A Paper Commercial - This is standard commercial lending. To qualify for such a loan a borrower needs to show all documents. Banks will verify property income based on leases and taxes (2years). Profit and lost statement will be required as well as income and expenses statement. Assets will be verified and credit score will be part of the lending decision.
2. Stated Income Loans - This categorie of commercial lending has been developed recently. The primary difficutlty with these loans for most banks that provide these types of financing is to establish the value. The value of a commercial property is normaly established by the income it generates. If income can not be verified then establishing values and LTVs is more difficult. Bank providing these types of financing will command higher rates due to higher risks.
3. Hard Money Commercial Loans - This is a little different than Hard Money Residential. Commercial Hard Money is for borrowers or properties that have issues. It does not mean Stated / Stated or no documentation etc... Valuation will be a concern as everything else listed above, however, a Hard Money lender will be much more flexible looking at the documents, credit, reserves, occupancy, leases etc... In addition, loan terms will also be more adaptable.

Hard Money Commercial lenders offer usualy more flexibility than banks and will lend on properties that bank will not consider lending on. Combining a number of these different factors will make a borrower get a Hard Money loan.