Commercial Mortgage Loans

The Commercial Mortgage Loans Available To Small Businesses

As a small businessperson you have three options from your commercial mortgage loan officer.

First is the conventional 70 to 80 percent loan-to-value deal. Commercial loan officers are partly compensated based on the size of the loan they bring to the bank—the size of the asset. So if they can get a conventional 70 to 80 percent loan-to-value commercial loan done, they will.

Second is the 90 percent SBA 7(a) loan, which is a bad deal for commercial building financing most of the time because it’s always going to be a floating rate loan. A 7(a) makes great sense for other types of financing, like business acquisitions, but not for commercial real estate. If push comes to shove and a borrower doesn’t have 20 to 30 percent to put down, then the commercial mortgage loans officer will offer the SBA 7(a) loan, which can also do a 90 percent loan-to-cost mortgage. That banker will get paid on a 90 percent loan to do a little more work than on a conventional loan, but the 7(a) will still make that commercial mortgage loan officer more money than with a 504 loan because of how it’s structured.

Third is our SmartChoice commercial loan, otherwise known as the 504, in which the banker gets paid only on the 50-percent first mortgage portion, not to mention that there is a bond issuance on the second mortgage, which means a few more hoops to jump through for the banker. Now, because we are a specialist firm, this is what we do day in, day out. It’s not a headache for us, nor is it a headache for our borrowers since they have us to lead them through it. But with most ordinary bankers, going through this process can be a real nightmare.

We’re the only lenders nationwide to always lead with our particular commercial mortgage loans product [the SmartChoice or 504 commercial loan], and we do it all day long. We have much greater and specialized knowledge than anyone else in the country about this particular loan program.