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Elijah Moore
Elijah Moore

Buying Commercial Property Down Payment



The 10 percent down payment is one of the best benefits of the SBA 504 program. In some cases, such as a single use property, or if the business is less than two years old, owners may be required to provide a 15% down payment. Yet in either scenario, the minimum down payment is significantly less than the 20-40 percent required for a conventional loan.




buying commercial property down payment


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Market instability or inflation expectations often cause an increase in monthly payments for many property owners. The good news is that the SBA 504 loan is unaffected by market volatility. The 504 program allows borrowers to finance the purchase of their commercial property with below-market, long-term fixed interest rates. Ultimately, 504 borrowers can hedge against rising interest rates and stabilize their occupancy costs for the entire life of the loan. Business owners who know their occupancy costs can more easily budget and focus on future financial growth.


In addition to the acquisition of commercial property, the SBA 504 loan program also allows business owners to finance equipment and other fixed assets, such as fixtures, furnishings and machinery with a service life of at least 10 years. Some equipment financing examples include: commercial printing equipment, medical & dental machinery, and gym equipment.


"@context": " ", "@type": "FAQPage", "mainEntity": "@type": "Question", "name": "How Much Do I Need to Put Down on a Commercial Property?", "acceptedAnswer": "@type": "Answer", "text": "Commercial properties, also called commercial real estate, income, or investment property, are buildings that house businesses or land that is solely intended to generate profits either from rental income or capital gain. They include office buildings, medical centers, industrial properties, malls, hotels, retail stores, multifamily housing, farmland, garages, and warehouses. This can also include larger residential rental properties. Typically, the purchase and/or renovation of these properties is financed by a commercial real estate loan. There are five types of commercial real estate loans, namely SBA 7(a) Loan, CDC / SBA 504 Loan, Traditional Commercial Mortgage, Commercial Bridge Loan, and Commercial Hard Money Loan. Each of the aforementioned loans has unique terms and qualifications.The commercial loan process varies greatly from the standard residential mortgage processes. Governmental bodies do not support these loans; consequently, the majority of commercial lenders are risk-averse and thus charge higher interest rates compared to a home loan. Before applying for a commercial loan, there are several factors that a borrower ought to consider." Commercial properties, also called commercial real estate, income, or investment property, are buildings that house businesses or land that is solely intended to generate profits either from rental income or capital gain. They include office buildings, medical centers, industrial properties, malls, hotels, retail stores, multifamily housing, farmland, garages, and warehouses. This can also include larger residential rental properties. Typically, the purchase and/or renovation of these properties is financed by a commercial real estate loan. There are five types of commercial real estate loans, namely SBA 7(a) Loan, CDC / SBA 504 Loan, Traditional Commercial Mortgage, Commercial Bridge Loan, and Commercial Hard Money Loan. Each of the aforementioned loans has unique terms and qualifications.


Unique Properties Inc. is a firm specializing in leasing, dispositions, acquisitions, and property management of industrial, land, office, medical, retail, and multifamily properties. Click here to browse our commercial property listings for rent in Denver. With over 40 years experience in Colorado commercial real estate, we are positioned to help clients reach their financial and business goals. Contact us for more information regarding commercial property loans. We can discuss your needs, answer your questions, and help ease the confusion associated with the purchase of commercial properties.


A: Certainly. This chart below illustrates the typical financing breakdown as well as a couple different unique scenarios like when a new business is purchasing a special purpose property.


While most people associate commercial real estate loans with investing in commercial real estate, the uses for these loans are actually more specific than that. Commercial real estate loans are designed to finance the purchase or improvement of property that is being used for your own business. To get a commercial loan, you need to use a majority of the property securing the loan for your own business purposes.


There are several types of loans that can be used to finance commercial property. Each option has its own rates, terms, eligibility requirements and application process. So, before you apply, decide which type of loan is right for you. Here are some options to consider:


Key takeaway: If you are unable to qualify for a bank term loan, you may be able to apply for an SBA loan. Even though it may have a lower down-payment requirement, the SBA is a last-resort lender.


Lenders look at five factors: your personal credit score (which should be at least 600), your net worth (the difference between your liabilities and your assets), your liquidity (how much liquid cash you have on hand), your business experience (as it applies to the real estate you\u2019re financing), and your income (both your personal and commercial property portfolios)." } }, "@type": "Question", "name": "How long are the terms of commercial real estate loans?", "acceptedAnswer": "@type": "Answer", "text": "Commercial real estate loan repayment terms are shorter than the average 30-year residential loan. In most cases, longer repayment schedules result in higher interest rates, but shorter terms with smaller payments could leave you stuck with a balloon payment (a disproportionately large lump sum of money required to complete repayment) at the end of the term." , "@type": "Question", "name": "How much is the down payment on a commercial real estate loan?", "acceptedAnswer": "@type": "Answer", "text": "The minimum down payment for a traditional commercial mortgage varies between 15% and 35% of the overall purchase price, depending on the lender. With SBA 7(a) and CDC\/SBA 504 loans, the range is more standardized, falling between 10% and 15% of the purchase price." , "@type": "Question", "name": "What is a prepayment penalty on a commercial real estate loan?", "acceptedAnswer": "@type": "Answer", "text": "If you as a borrower attempt to pay down your loan ahead of the preset term schedule, you may incur a prepayment penalty fee. This is because lenders prefer to make their profits on the timeline they\u2019ve set; early payment can result in a yield loss for them, so prepayment penalties are enforced to recoup the shortfall." , "@type": "Question", "name": "What is a non-recourse commercial real estate loan?", "acceptedAnswer": "@type": "Answer", "text": "Should your loan go into default with a non-recourse loan, the lender can collect on the loan only by selling the real estate itself in a foreclosure sale; the borrower\u2019s personal assets aren\u2019t on the table. As they carry more risk for the lender, non-recourse loans aren\u2019t the norm, and they come with more inflexible conditions and longer loan terms." ] }] (function(w,d,s,l,i)[];w[l].push('gtm.start': new Date().getTime(),event:'gtm.js');var f=d.getElementsByTagName(s)[0], j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src= '//www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f); )(window,document,'script','dataLayer','GTM-NPKKZXM'); window._mfq = window._mfq []; (function() var mf = document.createElement("script"); mf.type = "text/javascript"; mf.defer = true; mf.src = "//cdn.mouseflow.com/projects/afa4e9b3-190e-47e4-8c06-8598065c1c4d.js"; document.getElementsByTagName("head")[0].appendChild(mf); )(); skip to main content ? See if your business qualifies for a tax credit worth up to $26k per employee. ? Call Now: 855-979-9597


The 7(a) is the most common SBA loan, and it has the widest range of applications. Most SBA 7(a) loans are given to established businesses to shore up their operating capital, but newer enterprises can also utilize them for purchasing commercial real estate. The maximum amount for this kind of loan ranges as high as 85% to 90% of the purchase price, up to $5 million, with a down payment equaling 10% to 15%. Interest rates are within the 5% to 8.5% range.


The minimum down payment for a traditional commercial mortgage varies between 15% and 35% of the overall purchase price, depending on the lender. With SBA 7(a) and CDC/SBA 504 loans, the range is more standardized, falling between 10% and 15% of the purchase price.


While most people assume commercial property loans or commercial real estate loans are for property investment, they have a more specific use. Commercial properties are buildings or lots that can house a business and have the purpose of gaining a profit either through income or capital gain. They are popular investments for many people and are often necessary for small business owners looking into owning their property rather than renting from someone else.


To buy commercial properties, many rely on commercial property loans to finance their decision. Unlike a mortgage for a house, banks will often need a large down payment on a commercial property loan, making them more daunting to apply for.


Term loans are what most people think of when they think of any type of loan. They are a lump sum provided to you by a bank or other financial institutions that will be repaid over time at agreed upon periods. In order to get a term loan for a commercial property, you must make sure to have excellent credit and solid financial history, as they tend to be harder to be approved for. 041b061a72


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