Commercial Loans Chicago

Commercial Loans Chicago

Gustan Cho Associates are mortgage brokers licensed in 48 states

This guide covers qualifying and getting approved for commercial loans Chicago at Gustan Cho Associates. Gustan Cho Associates is a one-stop lending shop for all types of lending.  Looking for Commercial Loans Chicago? You have come to the right website. Gustan Cho Associates has a national reputation for being able to do mortgage loans other lenders cannot do, says John Strange, a senior residential and commercial loan officer at Gustan Cho Associates, Inc:

The Gustan Cho Team are experts in investment home financing. We have a national reputation for being the nation’s premier one-stop lending shop. We can access every residential, business, investment, and commercial mortgage loan program.

There are various types of commercial real estate buildings in Chicago. There are hundreds of different types of Commercial Loans Chicago. Available for various properties. Each type of commercial loan has different commercial lending guidelines regarding credit, asset, and income requirements.

Types of Commercial Loans Chicago Offered

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Here are the types of investment and commercial loan programs available:

Acquisition Commercial Loans Chicago

There are two types of acquisition lending. Long-term acquisition financing is where the real estate investor purchases a stabilized investment property. Short-term acquisition property is where the investor purchases an investment property that needs rehab or stabilization. The investor will flip or seek long-term financing after rehabbing or stabilizing the property.

Commercial Finance Programs

We offer both acquisition and rehab investment lending to real estate investors. Interest rates on commercial loans depend on the type of property and the down payment.

  • Hard Money Loans
  • Short-Term Bridge Loans
  • Blanket Investment Property Lines Of Credit For Investors With Multiple Properties
  • Recourse and non-recourse commercial loans

Recourse loans are commercial loans where the investor personally guarantees the commercial loan. Non-Recourse loans are commercial loans where the investor has no personal guarantee, and the lender holds the collateral on the investment property. The down payment requirement depends on the commercial property type but is normally 20% to 35% down payment, depending on the risk factor and strength of the commercial loan borrower.

Acquisition and Development Commercial Loans Chicago

Acquisition and development, commercial loans, or commercial mortgages, which commercial lenders fund to investors purchasing an investment property that needs work. The lender will fund the acquisition plus the rehab/development costs of the project.

Acquisition and development loans require an as-is appraisal and an after-improved appraisal. There are many different types of acquisition and development loan programs. An alternative to doing a combo acquisition and development loan.

Real estate investors can consider getting a hard loan for the acquisition. Once the property is stabilized, getting it refinanced for long-term financing. Many real estate investors think hard money loans are only for first-time investors or investors with bad credit. This is not the case. We will further discuss the great benefits of Short Term Hard Money Loans.

Benefits of Non-QM Loans Versus Hard Money Loans

Benefits Of Non-QM Loans Versus Hard Money LoansAs mentioned earlier in this article, hard money loans are not only for real estate investors with bad credit or non-bankable borrowers. Hard money loans are a great tool for a real estate investor to use and benefit from it than traditional commercial financing.

Depending on the type and amount of the loan, you may have to make a down payment of at least 10% of the project cost on SBA loans. This may be higher for new businesses or special-purpose properties.

Time is money, and the streamlined process to get a hard money loan approved and funded takes two to three weeks in most real estate purchase transactions. The negatives are that investors will pay a substantially higher interest rate. The cost of hard money loans is higher than traditional commercial financing. Non-QM Loans have substantially lower mortgage rates.

Case Scenario Buying a Multi-Family Building With Hard Money Loans

Let’s take a case scenario of a real estate investor purchasing a vacant 8-unit apartment building for $200,000. The investor can get a hard money loan for 70% loan to value, which means he needs to put a $60,000 down payment. The hard money lender will only finance the investor’s $140,000 interest at a 9% rate.

The hard money lender will also finance the real estate investor’s rehab cost of an additional $100,000. The borrower needs to put an additional 25% of the rehab cost of $25,000. The total down payment required on this transaction would be $85,000. The total amount financed would be $140,000 for acquisition and $75,000 for construction costs for the stabilization and rehab of this 8-unit apartment building:

The total amount would be $215,000. In this scenario, let’s assume it takes six months for the apartment building investor to stabilize and rehab all eight units and rent each unit for $1,000 per unit, which means its cash flows at $8,000 monthly gross rent. The hard money borrower now has this 8-unit apartment building stabilized and is worth $800,000.

How Does Hard Money Lending in Chicago Works

The hard money investor now will get end financing from a commercial lender at a 4% interest rate on a 5-year balloon commercial loan amortized for 30 years at 80% loan-to-value.

The new commercial loan will be $640,000. Real estate investor will pay off the balance of the hard money loan, which is $215,000, and has cash of $425,000 to use for other property acquisitions. 

Real estate investors will have positive monthly cash flow, $425,000 from the cash-out refinance, and pay off the hard money lender. The investor does not need income verification or tax returns to provide a hard money lender. Hard money loans close in 2 to 3 weeks.

Asset-Based Commercial Financing

Asset-based commercial loans are commercial mortgages that are collateralized by the assets of the real estate investor, where the lender will fund based on a loan to value set by the lender. The lender will underwrite this loan based on the property, not the borrower.

Bridge Loans

Bridge loans are interim financing that benefits the borrower in the following ways: Bridge Loans close in two to three weeks. Bridge Loans are short-term hard money loans where the purpose and benefit of bridge loans is that it does not have pre-payment penalties.

Bridge Loans do not require much paperwork and often will not require a full appraisal or environmental report. Bridge Loans are a great tool for purchasing vacant properties, foreclosures, and properties needing rehab. Bridge Financing is a short-term loan used until the borrower or property can qualify for permanent financing. 

Bridge loans are normally used to purchase a foreclosure, a property needing rehab, vacant properties, or properties with multiple liens or needing stabilization. Investors use bridge loans to rehab/stabilize their investment properties quickly. Once stabilized, real estate investors sell the property or refinance to long-term financing with lower interest rates and terms.

Construction Loans

Construction loans are short-term commercial loans: These are given by a commercial lender to a commercial mortgage loan borrower who needs to develop commercial properties such as apartment buildings, homes, strip malls, office space, warehouses, and storage units.

Construction loans are also for property owners who need to remodel and renovate their existing properties. The property, land, and other tangible assets are used as collateral to secure commercial financing.

In commercial loans Chicago by selling the property after the construction phase. Or when the property owner gets permanent financing when the construction project is finalized.

 What Are SBA Loans: Small Business Administration

The Small Business Administration offers SBA Loans to assist small businesses in the United States to get small business loans: This holds true as long as the commercial SBA loan applicants can meet SBA mortgage lending guidelines. Small business owners can get up to 90% loan-to-value financing via the SBA Loan Program. SBA loans are popular commercial loans in Chicago and were created for business ownership. Restaurant owners, grocery store owners, gas station owners, convenience store owners, hotel owners, and storage unit owners can all qualify for Small Business Administration mortgage loans.

How Do SBA Loans Work

Small Business Administration (SBA) mortgage loans are supported by the federal agency known as the Small Business Administration (SBA), which aids in providing financing opportunities to small businesses and entrepreneurs.

SBA mortgage loans can be used for purchasing, refinancing, or renovating commercial real estate, such as hotels, office buildings, warehouses, or retail stores.

SBA mortgage loans have many advantages for both borrowers and lenders. For borrowers, they offer low down payments, extended repayment terms, and competitive interest rates. Lenders offer high security, as the SBA guarantees up to 90% of the loan amount over $1 million in case of default. In this section of this guide on commercial loans Chicago, we will show you how lenders can make money with SBA mortgage loans by using an example of a hotel loan purchase.

Hotel Loan Purchase Case Scenario

Let’s say you are a lender who wants to finance a hotel purchase for a borrower. The purchase price of the hotel is $1.12 million. The seller agrees to pay the SBA fees and closing costs and carries back a $120,000 note as part of the deal. This means that your loan amount is $1 million. Since the loan amount is over $1 million, the SBA guarantees 90%, or $900,000. This means that your exposure in case of default is only 10%, or $100,000. However, you can reduce your risk even further by collecting fees and reserves from the borrower.

You can charge 5 points ($50,000) as a lender fee and 7.5% over SOFR (Secured Overnight Financing Rate) as the interest rate. SOFR represents a benchmark rate that mirrors the expense of borrowing cash overnight while using Treasury securities as collateral.

Most lenders borrow at SOFR and float these loans with SOFR, meaning that they adjust the interest rate. According to the changes in SOFR, you can also collect a 6-month payment reserve at closing. The $70,0 reserve that can cover any missed payments by the borrower in case of financial difficulties. So, your total fees in your possession are $50,000 + $70,000 = $120,000. Your exposure is zero; you have already covered your potential loss with the fees and reserves. Now let’s look at your potential profit from this deal. Assuming that the borrower pays on time and does not default, you can earn $40,000 in the first year from the 5 points and $75,000 per year from the interest over SOFR at 7.5%.  $300,000 in total if the borrower pays off the loan in 5 years with a prepayment penalty of one
year’s interest. That’s $415,000 over five years from one $1 million deal!

Benefits of SBA Mortgage Loans

SBA mortgage loans have many benefits for both borrowers and lenders. Some of these benefits include credit flexibility: While SBA lenders often require good credit, SBA loans can be easier to qualify for than some traditional bank loans. The Small Business Administration guarantees the loans, which helps to reduce the risk to lenders.

Long repayment terms: SBA loans can offer long repayment periods. For example, the maximum duration for equipment, working capital, and inventory loans are ten years. Real estate loan terms can be up to 25 years. Large Loan Amounts: SBA loan amounts can range from as small as $500 to as large as $5 million, depending on the program and your needs.

Set maximum interest rates: SBA loans have set maximum interest rates based on market conditions and vary by loan program and size. These rates are usually lower than conventional loans. Continued support: Some SBA loans come with continued support to help you start and run your business.  Resource and Help Desk: For example, you may access free counseling and education from SBA resource partners such as SCORE or Small Business Development Centers.

Drawbacks of SBA Mortgage Loans

SBA mortgage loans also have some drawbacks that you should consider before applying for them. Some drawbacks include less competitive rates and terms than some bank loans: While SBA loans have set maximum interest rates, some loans may offer lower rates and terms depending on your creditworthiness and relationship with the lender. Long approval times:

SBA loans must be approved by both the lender and the SBA, which can extend the process. Working with a lender that the SBA authorizes to make the final loan decision can improve the process, but it may still take longer than other financing options. Possible down payment requirement

Contact other lenders first: You must show that you have tried to get financing from other sources before applying for an SBA loan. You have to contact at least two lenders and get their written denials. Borrowers who don’t qualify for SBA loans may want to consider online lenders for the necessary funds. Online lenders may offer faster and easier approval, lower credit requirements, and more flexible terms and rates.

Why Using SBA Loans is a Great Idea For Business Owners

SBA mortgage loans are an excellent way for lenders to make money with low risk and high reward. By leveraging the SBA guarantee, charging fees and reserves, and floating the interest rate with SOFR, lenders can earn a substantial income from financing commercial real estate projects for small businesses. SBA mortgage loans also have many benefits for borrowers who need financing for commercial real estate purposes.

SBA Loans offer extended repayment terms, competitive interest rates, and low down payments. They also come with a guarantee from the SBA that lowers the risk for lenders and makes it easier for borrowers to qualify.

SBA mortgage loans also have some drawbacks that you should consider before applying for them. They may have less competitive rates and terms than some bank loans, long approval times, possible down payment requirements, and limited uses. Therefore, before applying for an SBA mortgage loan, you should compare it with other financing options.

Recourse Versus Non-Recourse Commercial Loans Chicago

Commercial mortgage loans are commercial loans guaranteed by the commercial mortgage loan borrower. In contrast, non-recourse commercial loans are commercial mortgage loans that the commercial mortgage loan borrower does not need to guarantee on the commercial loan.  For more information on commercial loans Chicago, contact Gustan Cho Associates at 800-900-8569 or text Gustan on his cell at 800-900-8569 or text us for a faster response—or email

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  1. I am 18 months into Chapter 13 repayment and am looking for a cash out refinance to pay off my bankruptcy. The $310,000 would refinance the existing mortgage of $240,000 and pay off the remaining $50,800 of my bankruptcy.

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