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Let’s be real: commercial lending doesn’t sound exciting-until you realize how much money it can save your business. Whether you’re buying a warehouse, refinancing an office, or expanding into retail space, understanding your commercial financing options is critical to making smart long-term decisions.
In this episode of the LFG Lending podcast, we break down the most common types of commercial loans, what lenders are looking for, and how to set your business up for success when financing property or equipment.
When Should You Consider Commercial Lending?
If you’re a business owner and any of the following apply, it might be time to explore commercial lending:
You’re ready to buy your office, warehouse, or retail space
You’re looking to refinance a property for better terms
You want to expand your operations or locations
You need to finance equipment or access a line of credit
Types of Commercial Real Estate Financing
1. Full Documentation Commercial Loans
These are the most common types of commercial loans and are ideal for both purchases and refinances.
What’s Required:
- 3 years of business & personal tax returns
- Personal financial statement
- Bank statements
- Business plan or projections (sometimes)
What You Can Finance:
- Office buildings
- Warehouses
- Retail stores
- Churches
- Gas stations or auto body shops
These loans are typically done through local or regional banks or credit unions, not the big-name national banks.
“Working with a broker helps you avoid lenders that are too slow or inflexible.”
2. SBA Loans (Small Business Administration)
SBA loans are ideal for owner-occupied commercial properties and offer lower down payments-sometimes as little as 10% down.
Pros:
- Lower capital required upfront
- Government-backed, so lenders are more likely to approve
Cons:
- Long approval timelines (3+ months)
- More paperwork
- Only for owner-occupied properties-not investments
If you’re considering an SBA loan, make sure the seller is okay with a longer closing timeline.
3. Commercial Lines of Credit & Equipment Loans
Need capital but not ready to buy property? These options offer flexibility for operations or growth.
Lines of Credit:
- Often unsecured (no real estate needed)
- Based on your annual revenue (e.g., 10–15%)
- Great for smaller rehab projects or working capital
- Fast approval-often within 1-2 weeks
Equipment Financing:
- Can lower your monthly payments by refinancing equipment loans
- Often part of a larger financing package
“We’ve saved clients thousands by refinancing predatory equipment loans from 10%+ down to the high 6s.”
What Kind of Terms Should You Expect?
Loan Structure
- Not 30-year fixed like residential
- Usually 20- to 25-year amortization
- Often come with a 5-year reset or 5- to 10-year term
Example:
You get a 5-year fixed rate, and after five years, the loan resets at the current market rate for another term.
Interest Rates (As of Now)
- Typically in the 6% to low 7% range, depending on credit, collateral, and lender
What About DSCR / DCR in Commercial Lending?
Just like in investment property lending, commercial lenders evaluate the Debt Service Coverage Ratio (DSCR or DCR) to determine eligibility.
A good DCR is usually 1.2 to 1.25
This means your net income is 120–125% of your total monthly debt payment.
Thinking About Financing a Commercial Property or Equipment?
Whether you’re buying your first space, refinancing a warehouse, or just need capital for upgrades-LFG Lending can help you:
- Understand the best financing structure
- Match you with the right local lender
- Evaluate both real estate and business cash flow
- Assist with SBA or conventional options
- Add equipment loans or lines of credit when needed