When you think of a commercial loan, you may immediately picture large office buildings or industrial complexes. While these are common examples, there is a wide variety of property types that qualify for commercial loans. If you’re looking to finance a commercial property, it’s essential to understand which types of properties are eligible for these types of loans.
Common commercial property types that qualify for commercial loans
Office buildings
Office buildings, ranging from small single-tenant properties to massive multi-story buildings, are prime candidates for commercial loans. These properties are typically leased to businesses, and the income generated from these leases is what lenders consider when evaluating a commercial loan application.
Retail properties
Retail properties such as shopping centers, malls, and standalone stores can also qualify for commercial loans. Retail properties generate income through leases to retail businesses, and the viability of these businesses plays a major role in securing funding for these types of properties.
Industrial properties
Industrial properties, including warehouses, factories, and distribution centers, are often used for manufacturing or storing goods. Because industrial properties can have long-term tenants, they are often seen as stable investments, making them eligible for commercial loans.
Multifamily properties
Multifamily properties, typically apartment buildings with five or more units, are considered commercial properties. These properties generate rental income and can qualify for commercial loans. The size and rental income potential of the property are key factors in loan approval.
Mixed-use properties
Mixed-use properties that combine residential, commercial, and/or industrial spaces are also eligible for commercial loans. These properties are attractive to investors because they offer diversified income streams from both residential tenants and businesses.
Hotels and motels
Hotels and motels, which are considered income-generating businesses, qualify for commercial loans as well. Lenders evaluate the revenue potential of the hotel or motel based on occupancy rates, room prices, and other factors that affect profitability.
What Lenders Look For in Commercial Properties
For lenders, the key to qualifying a commercial property for a loan is the ability of that property to generate consistent income. Whether the income comes from tenant leases in office buildings or rental payments in multifamily units, the more income the property generates, the more likely it is that the lender will approve the loan.
Additionally, the location, condition, and market demand for a particular type of property also influence its eligibility for a commercial loan. A well-located office building in a thriving business district, for example, will be a much more attractive investment for a lender than one located in a declining area.
Looking to invest in a commercial property but unsure where to start? At UFinancial, our expert brokers can help you navigate the lending process, compare loan options, and secure the best deal tailored to your needs. Whether you’re purchasing an office building, retail space, or industrial property, we’re here to guide you every step of the way. Get in touch with us today and take the next step toward your commercial property investment!
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent. Content developed in partnership with IFPA.
Subscribe to our newsletter to read about ‘All things finance’
At UFinancial, we love talking about finance-related matters. From home loans and refinancing to financial planning, investing, and tax.
