Commercial real estate financing
Financing a commercial property is a process.
Here is the whole thing, in order.
This page covers what happens after you decide to move on an office, retail center, warehouse, mixed use building, or land: who you talk to, when the appraisal happens, what the application actually asks for, and what getting funded looks like. For loan programs and structures, see commercial real estate loans. If you already know the property and just need to move, the application is below.
How it works
Four steps, in this order
Commercial files move faster when the pieces happen in sequence instead of all at once. This is that sequence.
Talk with us
Call and walk through the property, the purpose of the loan, and where things stand today. An account executive listens first and tells you honestly which lenders are likely to want the file before anything gets submitted anywhere.
Order the appraisal
The appraisal is ordered through one of the appraisal partners we work with. It belongs to you, not to us, so if you end up financing elsewhere you still keep it. Once it comes back, the file moves into processing.
Complete the application
The application itself is straightforward. Submit it online and an account executive follows up to close any gaps. The final version goes out for a digital signature once the file is complete.
Get funded
Once a lender clears the file, closing gets scheduled and funds move. The lenders we work with fund the loan, not Busy Bee. Our part is making sure the right one said yes.
Before you apply
What the file actually needs
Every commercial deal is different, but most files ask for the same four categories of paperwork. Having these ready before you start is the single biggest thing that speeds up a file.
Property documents
- Signed purchase contract and any riders, or your most recent loan statement if this is a refinance
- Current rent roll and copies of leases, if the property has tenants
- Property tax bills for the most recent year
- Contact information for the listing agent, title company, and any attorney on the deal
Income documents
- Two years of complete business tax returns, including all schedules
- Two years of personal tax returns for every owner with a meaningful stake in the business
- Year to date profit and loss statement and balance sheet
- A short letter explaining any gap or unusual change in income
Source of funds
- Bank, brokerage, or retirement account statements for the last three months covering the down payment and reserves
- A signed gift letter and proof of transfer, if part of the funds are a gift
- A copy of the settlement statement, if the down payment is coming from the sale of another property
Debts
- A list of every business and personal debt, with the creditor, balance, and monthly payment
- The last three statements for each of those accounts
- Details on any other mortgages, notes, or leases the business or its owners currently carry
None of this needs to be perfect before you call. Bring what you have, and we will tell you exactly what is still missing for the program that fits.
The appraisal
What an appraisal actually is
An appraisal is a licensed appraiser's independent estimate of what a property is worth. Almost every commercial lender requires one before funding a loan, because the lender needs to know the loan amount is not larger than the property backing it. The appraiser has no stake in your deal closing. Their only job is an honest number.
The appraisal gets ordered early in the process for a reason. Underwriting cannot really begin until the number comes back, so the sooner it is ordered, the sooner the rest of the file moves. That appraisal belongs to you once it is paid for. If you end up financing the deal somewhere else, you still keep it.
It is paid directly to the appraiser, not to Busy Bee. If anyone asks you for money before you have a term sheet in hand, ask exactly what it pays for and get it in writing.
Three approaches
How an appraiser gets to a number
There are three accepted ways to value a property. An appraiser usually runs more than one and weighs them based on the type of property.
Cost approach
Start with what the land would cost vacant, add what it would cost to rebuild the structure new today, then subtract for age, wear, and anything outdated. This approach carries the most weight on a purpose built property with little to compare it to.
Sales comparison approach
The appraiser finds a handful of similar properties that sold recently nearby and adjusts for differences in size, condition, age, and location. It is the most intuitive of the three and often the most heavily weighted on straightforward properties.
Income approach
The appraiser looks at the income the property produces, or could produce, and converts that income stream into a present value. On a leased commercial property, this is usually the approach that carries the most weight, since the building's value is tied closely to what it earns.
The appraiser correlates all three into one final number. That number, not the price you agreed to pay, is what most commercial lenders will actually finance against.
Ready to move on the file?
Talk with us first if you have questions, or start the application directly if you already know the property. No cost to apply, no cost to find out where it lands.
Figures referenced on this site are program ranges offered by third party lenders we work with. They are not an offer or commitment to lend, and every file is subject to that lender's underwriting and approval.