Commercial Loan Purpose...What Are You Going To Do With The Money?

Can you explain to a lender or a broker your commercial loan purpose? This is the first thing a lender wants to know when you request a loan and you need to be able to communicate it to them.

So, why do you need the money?

Acquisition or Purchase
Is the conveyance of title to you (or your entity) of an existing building or raw land.

Usually for a purchase, a lender will loan 80% - 90% of the current appraised value of the property. This percentage will vary depending on property type and income from the property.

Refinance
A current mortgage note is being paid off and a new mortgage note is being created. A refinance is usually done to get better terms or pull out cash from the value of a property.

Usually for a refinance, a lender will loan 80% - 90% of the current appraised value of the property. This percentage will vary depending on property type and income from the property. Of that percentage, the lender will pay off the current mortgage note and the remaining amount of the loan to the borrower.

Construction
This is for the building of, renovation of, or rehabilitation of real estate. Generally, these loans are based on the value of the property as completed . Be sure to understand if your lender is lending on Loan to Cost or on Loan to Value as Completed.