Commercial loans in San Diego are an advantageous way to finance crucial business endeavors. It can be difficult for small businesses in particular to field upfront costs, which can keep you from taking your business to the next level. Here’s everything you need to know about commercial loans.
What Is a Commercial Loan?
Similar to personal loans, commercial loans are funding arrangements between financial institutions and businesses that need money. Commercial loans are generally used to fund things like capital expenditures, operating costs, and in some cases, more basic things like payroll or supplies.
How Do Commercial Loans Work?
Businesses of all kinds can apply for and receive commercial loans to finance short-term needs, such as crucial operating costs or the purchase of essential equipment.
Like personal loans, commercial loans (sometimes referred to as small business loans) come with their own repayment terms and interest rates, which are calculated based on your company’s qualifications. Usually, they’re “term loans,” meaning they have either a floating or fixed interest rate and a specific repayment schedule.
Most businesses can pick their repayment terms. Common repayment terms range anywhere from one to 25 years.
To receive a loan, the business must post some form of collateral, such as property or equipment. That way, if the business defaults on its loan or declares bankruptcy, the bank or financial institution can claim the collateral.
What Do You Need to Apply for a Commercial Loan in San Diego?
The items you’ll need to apply for commercial loans in San Diego depend on the financial institution you’re applying through.
In general, you should have a document illustrating both your company’s needs and how the funding will help you achieve new levels of growth. You should also write out the repayment terms you’re able to afford, as well as the exact funding amount you need.
If you’re hunting for commercial real estate in San Diego county and you’re working with a real estate agent, they should be able to provide a reliable estimate for your loan amount.
Additionally, you should include a business plan illustrating your goals and the strategies you’ve formulated to achieve them. Your plan should include your business objectives, financial projections, and relevant information on your industry and specific company.
Additionally, you should request your personal and business credit scores since lenders will check these when reviewing your application. Of course, the higher your credit score, the better your chances not only of being approved but also of having the power to negotiate.
Finally, you should prepare the various necessary documents, including your company’s profit and loss statements, bank statements, tax returns, cash flow statements, balance sheets, and business licenses.
What Is a Good Credit Score for a Commercial Loan?
Lenders will look at your business credit score and want to see a minimum of two years of business history, if available. However, your personal credit score actually plays a major role in deciding whether you’ll be granted a loan and what the terms of that loan will be.
Like everything else, the higher your credit score, the better your chances. If your personal credit score is 700+, you have numerous options on the table.
A credit score between 640 and 700 is considered strong — not exceptional, but good. Some loans, like SBA loans, require a minimum credit score of around 680. Anything below 640 will disqualify you from the majority of commercial loans.
For San Diego commercial real estate loans, you’ll likely need a minimum credit score of 660. San Diego commercial property is quite competitive, which is why credit scores must be higher.
What Is a Good Interest Rate for a Commercial Loan?
Interest rates will vary based on the type of commercial loan you receive. Some commercial property loans come with a whopping 18% interest rate.
For most business loans, an interest rate between 6-7% is a good, manageable rate. When comparing rates, you should look at the annual percentage rate, which includes interest rates and other fees associated with the loan.
How to Get Approved for a San Diego Commercial Loan from BEST Lending Co.
At BEST Lending Co., we regularly help clients get approved for commercial loans in San Diego.
Our commercial loan application process starts with a simple online application that allows us to get preliminary quotes to our clients within two hours. We boast an average closing rate of 15 business days, with interest rates starting at 6.75% for most commercial loans. Start your application now.
