Commercial real estate lending

[Chanda T.]

I’m looking to get financing on a mixed use property (355,000) - Apartment upstairs, commercial space first floor. All vacant as they just re-did it all.

My intention is to rent upstairs (1,800) and use the downstairs for my business. Currently I give 50% of my income (regardless of what I make) to the shop I currently “rent” a space at. Moving into my own space automatically doubles my income. The location itself is also better than where I am currently at.

My question is - do I tell the commercial lender my intentions for the property? Am I more or less likely to get approved if I will be the one paying the “rent” on the first floor? My traditional mortgage buddy told me to say it was purely for investment purposes in order to simplify the process. I feel like stating that I have a greater interest in paying the bills, and I can show that close to $30,000 a year is usually going to rent for my business... seems like a selling point?

After I state my intentions I can’t really press rewind so I’d love some advice!

Thank you!

[David H.]

@Chanda Taylor

Good afternoon Chanda!

This sounds like a great opportunity to utilize the SBA loan programs, either 504 or SBA 7a.

As long as the commercial space your business will be occupying is => 51% of the square footage it would qualify for SBA.

Currently, new SBA 7a loans have the first 6 months of P&I payed for by the government! Not a deferral, literally payed for by the government.

Additionally, SBA loans allow for up to 90% LTV financing, sometimes greater (tho increasingly rare).

The 504 loan is a bit convoluted, but the rates are at historic lows. The SBA 7a program rates are also at historic lows as well.

It’s worth checking with your bank to see if they offer SBA back loans. Also, national lenders that specialize in SBA lending may be the best option as they are more flexible, quick and experienced in SBA lending.

Best of luck!