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Small Balance Commercial Lending: Your Next Opportunity
It’s no secret that commercial real estate investments can be much more lucrative than residential ones. But what if you’re new to investing or have only landed residential deals so far? That’s where small balance commercial lending for small balance real estate comes in.
Real estate investors rely on small balance commercial lending to buy money-making assets like multi-family and mixed-use properties. And now is a great time to do so. Since 2020 Q2, multi-family investors have rented out an additional 1.06 million units and raised rent by 11% year over year.
Table of Contents:
- What Is a Small Balance Commercial Loan?
- Commercial Real Estate Loan Requirements
- Types of Small Balance Commercial Lending
- What Is the Minimum Credit Score for a Commercial Loan?
What Is a Small Balance Commercial Loan?
A small balance commercial loan is a long-term loan of $250,000 to $5,000,000 that you take out for a small balance commercial property.
Unlike their high-balance counterparts, small balance commercial loans have a faster underwriting process, more relaxed requirements, and more flexible packages. This makes it easier to find financing solutions for small balance commercial properties.
Interest rates can vary based on loan amounts, term length, business credit scores, property types, and after-repaired value (ARV).
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Commercial Real Estate Loan Requirements
Your loan’s variable or fixed rates will depend on your qualifications. Although small balance commercial lenders have different requirements, most will expect:
- A debt service coverage ratio of at least 1.25
- Loan-to-value (LTV) ratio of 75% to 80%
- Minimum 20 — 25% down payment (SBA loans start at 10%)
- At least two years in business under current ownership
- Minimum $250,000 in annual business revenue (if applicable)
Types of Small Balance Commercial Lending
Many investors turn to small balance commercial lending to purchase or renovate an investment property. Small businesses may buy a building that they use as well as rent out to other companies.
The table below isn’t an exhaustive list, but it shows the primary ways real estate investors use small balance commercial loans.
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Commercial Loans for Apartment Buildings |
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Industrial Property Loan |
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Office Building Mortgage |
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Retail Property Loans |
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Key Takeaways
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- Taesent tincidunt vehicula ante, sed tempus libero vulputate.
- Lorem ipsum dolor sit amet, consectetur adipiscing elit.
- Lorem ipsum dolor sit amet, consectetur adipiscing elit.
- Taesent tincidunt vehicula ante, sed tempus libero vulputate.
Proin interdum dolor a ullamcorper molestie. Vivamus in justo velit. Aliquam vehicula massa et venenatis placerat. In hac habitasse platea dictumst. Maecenas scelerisque ipsum et mauris aliquam, eget rhoncus enim facilisis. Praesent tincidunt vehicula ante, sed tempus libero vulputate at. Proin sed erat neque.”
Daniel William
Co-Foundet Acme Corp
What Is the Minimum Credit Score for a Commercial Loan?
Small balance commercial real estate loans typically require a personal credit score of at least 660. Often, small balance commercial lenders will also look at your business credit score, which can range from zero to 100. Most small business commercial loans require a minimum business credit score of 75.
Small balance commercial lending could be your next step toward a profitable real estate investment. And with Revolution Realty Capital, you can land bigger and better deals on multi-family and mixed-use properties.
Apply now and let’s talk about your next deal.
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