Commercial Loans - Retail, Multi-Family, Office, Industrial

There are a number of different types of commercial loan - retail, multi-family, office and industrial for example. The details of each type are different, of course, but there are a number of features that they share that make them very different from regular mortgages for purchasing a home. There is, for example, much less emphasis on the credit rating of the borrower than in the housing market, and more on the possibilities of the property itself.

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This is because one feature, of whichever type of commercial loan - retail, multi-family, office or industrial, is that when deciding upon whether to lend or not the lender will look at the income generating possibilities of the property itself. So a retail loan, for example, would look at what the store could be rented for. That rent could then be used to pay some or all of the mortgage. The same with a multi-family unit: how much will each unit be rented out for? There are of course adjustments made for how likely it is that a unit will be rented, how often it will be vacant and so on, which is why some attention is still paid to the credit score of the borrowers.

There’s a second type of all these commercial loans - retail, multi-family, office loan and industrial, of course, which is when the borrowers are a business and expect to use the new property themselves. There’s not that much difference here: the only change is that it becomes the credit rating of the business itself that is considered.