Why would anyone get a commercial loan?

[Shaun Morgan]

I've been looking into how to jumpstart my business and I'm looking at every type of loan to refinance a property. I hear a lot of people say that they BRRRR with a commercial loan, but the more I look at it I can't figure out why anyone would want to get a commercial loan. The terms seem worse in every way. Higher down pow net (if not refinancing), higher interest, often adjustable, shorter life of the loan, same cash reserves requirements at least, etc. Am I missing some advantage?

[Alex Bekeza]

@Shaun Morgan

Besides reaching mortgage limits like @Philip Mccleary mentioned, I've found that one of the biggest reasons investors end up going with a commercial loan product is because their DTI/Tax Returns won't qualify them for conventional financing. Often times self employed and/or full time investors have large write offs and have to find a commercial loan because it will be "asset based." Rather than focusing the underwriting process on the borrower they will focus it on the property itself and its ability to generate income.

Some other perks of commercial loans are flexibility in terms of: vesting title, seasoning requirements, sourcing funds, and unique properties (commercial lenders take on a lot of bank fall out from obscure properties with mixed uses, grandfather clauses, and other nuances).