Types Of Commercial Lending

Types of Commercial Lending For Real Estate Investors

Gustan Cho Associates are mortgage brokers licensed in 48 states

In this guide on types of commercial lending, we will cover the various commercial loans available at Gustan Cho Associates for real estate investors. Commercial Lending is different and separate from residential lending. There are many types of Commercial Lending, just like there are various types of Residential Lending.

Many borrowers often assume that they know all types of commercial lending just because a loan officer is a residential mortgage loan originator. This is not the case; many residential loan officers are clueless about the various types of commercial lending. There are loan officers who do both;

  • Residential Lending
  • Commercial Lending

Many residential mortgage companies are now offering  Non-QM Loans and non-traditional financing and expanding into different areas and types of commercial lending.

Regulations on Commercial Mortgages

Commercial Lending is not regulated by the government like residential lending is. Regulators feel that commercial real estate investors are sophisticated investors, and the buyer’s beware theme comes into play.

There is no SAFE ACT, NMLS, or CFPB regarding commercial loan regulations and the various types of commercial lending. Commercial Loans do take longer to process. It can take up to 90 or more days to process a commercial loan from start to finish.

Various Types of Commercial Lending Options

What are the different types of commercial loans

Gustan Cho Associates wants to be your one-stop mortgage and real estate information resource center. Our goal is to offer our viewers and clients contact information and referral partners to residential lenders, commercial lenders, and specialty lending sources.

We have carefully selected and screened our staff writers and referral partners to create a one-stop lending and real estate information center in the United States. There are different types of Commercial Lending Programs, and we will take some time to explain each type of commercial lending program in this blog.

Types of Commercial Lending for Investors


Popular Types of Commercial Lending

Here are the types of commercial lending specialties out in the market today. Business Loans Through Small Business Administrations. The most popular and common types of commercial lending program for small businesses is a business loan from the Small Business Administration SBA.

SBA Loans are a great tool for entrepreneurs to create and launch their new businesses with little money and help from the Small Business Administration, also commonly known by many as SBA.

Asset-Based Lending

Asset-based lending is commercial lending where a business loan is securitized by the borrowers’ assets and collateral. Asset Based Lending is a secured type of lending.

So interest rates on these commercial lending types are lower than on unsecured business loans. Accounts Receivable Financing is an example of Asset-Based Commercial Lending.

Types of Commercial Lending That Is Cash Advanced

Cash Advanced Commercial Lending is similar to Pay Day Loans for consumers.

Cash Advance Financing normally funds in a week or less. They are for borrowers who need quick cash for one reason or another.

Traditional Versus Hard Money Loans on Commercial Real Estate

What is the difference between traditional and hard loans for commercial real estate?

Interest rates are very high, and these types of commercial lending are considered short-term bridge financing where the borrowers need it for a short-term basis. Factoring.

There are different factoring types of commercial lending, and we will cover more on factoring in other upcoming blogs.

Private Money and Hard Money Loans

Private and hard money loans are a quick way of getting fast financing at a higher interest rate. Normally is a great tool for short-term or bridge financing.

Hard Money Loans are not based on credit or income; the hard money or private money lender is more concerned about the borrower putting skin on the game. LTV (Loan To Value) down payment is key with hard money loans. Hard Money Loans do not require the mass amount of paperwork traditional commercial lenders require.

Church Lending

Gustan Cho Associates has a separate wholesale lending division for financing churches.

Church Financing is a specialty commercial lending where lenders will only lend to churches.

Commercial Lenders and Brokers

Commercial Loan Officers are not regulated like Residential Mortgage Loan Originators. In most states, you do not have to be licensed to become a commercial loan officer or broker.
When a commercial loan officer works on a commercial loan, the loan officer works as an intermediary agent representing the borrower and taking the deal to his or her commercial lending institution. A commercial mortgage broker is an individual and company with access to a list of commercial brokers. They have a fee agreement with commercial mortgage brokers.

Commissions on Commerical Loans

A commission is paid to the commercial broker at closing. This ranges anywhere between 1.0% to 5.0% or more. This commission is paid by the borrower. A separate fee agreement is signed by the commercial borrower and commercial broker.

The direct lender is aware of this fee agreement. They will list the broker fee from the borrower and pay the loan officer.

Borrower Paid Commission To Mortgage Brokers

Sometimes, the borrower can pay the broker’s fee directly to the loan officer. Every commercial deal can be different and unique. This is because there are no mortgage regulations with commercial loans.

Every commercial deal can be negotiated between the borrower, loan officer/broker, and direct commercial lender. If you are a commercial borrower looking for commercial lenders who may be the right fit, contact us at Gustan Cho Associates at gcho@gustancho.com. Or call us at 800-900-8569 or text us for a faster response.