Getting a Bad Credit Commercial Mortgage

Many banks and other lenders offer bad credit commercial mortgage, but borrowers will generally have a hard time qualifying for this type of loan. If you have a bad credit history, it would really be hard for you to convince a loan provider to grant you a commercial mortgage that you can use to acquire, repair or renovate buildings or properties used in your business. Still, if you badly need a loan and you cannot wait for your credit rating to improve, you really need to find a way to qualify for a bad credit commercial mortgage. Here are three ways to do it.

1. Commercial Hard Money

Of all the three options, this is the easiest to obtain. Hard money lenders do not really look at traditional considerations, such as credit scores, when considering a commercial mortgage. So, the processing of this type of loan is fast. The most important aspect that hard money loan providers look at is the value of the property that will be acquired or renovated using the loan proceeds. Borrowers are expected to accept a loan amount that is much lower than the value of the property being considered.

When applying for this loan, all you need to do is go to a known hard money lender and submit your application documents for review. If you get approved, you can get the loan proceeds after a few days. Bear in mind that this loan can be quite costly and it has only a short-term financing period. Apart from higher interest rates (about 13 to 16 percent), a commercial hard money mortgage also comes with very steep closing costs and other expenses.

2. Conventional Bad Credit Commercial Mortgage

This option, which is known within the industry as a story lender loan, simply involves the negotiation of loan terms with banks or other financial institutions. Under this option, you need to tell lenders about the story or reason behind your financial difficulties, bad credit history or poor cash flow. In doing so, you might find a lender who will be sympathetic to your situation and lend you the money you need.

Remember, not all banks and lenders are very open to negotiations, so you need to look for lenders that have a history of approving this type of loan. Like a hard money loan, this loan can also be quite expensive. Be prepared to pay extra for financing costs and also high interest rates.

3. SBA Commercial Mortgage

When looking for a bad credit commercial mortgage, you can consider a Small Business Association commercial loan. Many banks and loan providers are more open about this type of loan because it is backed by the SBA. In case a borrower is unable to repay the loan, the SBA will give back the lender’s capital. Even so, most lenders are still strict when reviewing applicants for this type of loan. If you have bad credit, the key is to look for a bank or lender known to accommodate businesses or entrepreneurs with bad credit scores. SBA loans also have competitive interest rates and lower closing costs just like other traditional commercial mortgages. However, approval for this loan may take a long time.

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