Commercial loans are loans acquired by businesses to fund specific projects. For instance, most businesses use commercial loans to buy new property or finance large construction projects on properties already owned. Some companies also use commercial loans for investment purposes or to cover a particularly strenuous period of operations. These commercial loans also have associated origination fees and they tend to be higher than individual loans of the same kind, in part because commercial loans are larger and of the higher risk for lenders.
Down payments are required as upfront payments, a portion of the principal that the borrower agrees to pay when creating the loan as an act of good faith. While individual down payments can vary, usually around 20 percent but often falling lower when mortgage insurance is involved, commercial down payments are less flexible. Lenders usually require at least 20 percent, and often ask for higher down payments to manage the risk.
A certain number of fees are set for the commercial loan. The appraisal, for instance, is typically several hundred dollars for individual loans and is often higher for commercial loans, which require a more detailed study of the property and its title history. Likewise, commercial loans require extra set fees for environmental studies and other analysis, which can easily move into thousands of dollars.
Percentage Fees for Closing
Closing fees, in general, are often based on a percentage of the loan principal. This naturally makes commercial loan fees more expensive than individual version, but the percentage points involved are still very important. For smaller loans the fees may be as low as two percent. Three percent is much more common, and for large, complex loans, 3.5 percent may be more common.
Percentage Fees for Guaranteed Loans
A guaranteed loan is a special commercial loan that is partially sponsored by the Small Business Administration, SBA, making it much easier to qualify for. However, at the same time the SBA requires a guarantee fee for sponsoring the loan. This fee mirrors the normal loan fee and can usually falls around 3 percent.