Maryland Commercial Loans

Securing a commercial loan in Maryland

A commercial loan in Maryland can help you purchase the property you need to build your business or investment portfolio.

Commercial Real Estate Loan Types

There are many different types of commercial loans. The type depends on the purpose of the property being purchased. A commercial loan could finance a hotel or motel, light industrial building, marina, apartment building, auto services building, bed-and-breakfast, mixed use property, mobile home park, multi-family unit, office, campground or RV park, convenience store, gas station, health care center, retail space, self storage compound, warehouse, or restaurant. Here are some of the most common types:

Traditional Purchase Loan

Purchase loans have fixed or adjustable rates, much like a residential mortgage. Interest rates are contingent on loan-to-value ratio, or LTV, and the property is used as collateral. There is some relative flexibility where credit and income is concerned with traditional commercial purchase loans.

Bridge Loan

Outstanding credit and high, steady income is often required for bridge loans, since they offer immediate capital on the short-term - typically one year - to suit a commercial project's beginnings, often from a private lender. Longer term financing should be pending while these short-term funds are borrowed.

Participating Mortgage

Most used among lasting retailers and stable offices, the participating mortgageholder gives the lender a cut of the business or real estate revenue along with interest and principal payments every month.

Hard Money

Usually offered by private lenders because of their substandard requirements, hard money loans carry unusually high interest rates since they are particularly high risk. The property serves as the collateral for financing.

Commercial Loan Requirements

Credit and NOI

Commercial loans typically have strict credit and debt requirements, although the spectrum is wide thanks to the flexibility many private lenders offer. To have a credit (FICO) score of 700 or higher is ideal, but certainly many commercial loans have been approved for borrowers with credit in the 680 to 700 range. There is hope for borrowers whose credit is even lower, but lenders will look for compensating factors, such as a high net operating income (NOI), which should surpass the monthly mortgage by at least 25%.

Debt Service Coverage

Another factor lenders will examine is borrower debt service coverage, which is a ratio of the yearly net operating income over the mortgage payment. Businesses should have a debt service ratio of over 1.25, as determined by a licensed appraiser's estimates.

Debt Yield Ratio

Lenders will also consider a commercial loan borrower's debt yield ratio, which is their NOI divided by the total mortgage loan. A business with an NOI of $500,000 per year and a prospective loan amount of $7,000,000 will have a debt yield ratio of 0.0714, or 7.14%, meaning even if the property is foreclosed out the gate, the lender will receive a 7.14% return.

Maryland Commercial Loan Lenders

Commercial lenders, whether for small business, hard money or others can be difficult to find. Lender411 has a number of commercial lenders in its directory. Find one near you by filling out the form at the top of this page. 

Baltimore, Columbia, Silver Spring, Ellicott City, Dundalk, and Rockville are among the largest and most established cities in Maryland.  These places host many of the major corporations and research institutions that are located within the state and also contribute a significant amount of revenue into the hands of residents.  If you’re looking for commercial property, connect with a Maryland lender to explore your loan options.

Maryland Small Business Loan Resources

The U.S. Small Business Administration, or SBA, offers affordable financing opportunities to help small businesses grow. Maryland has one SBA District Office in Baltimore, but the neighboring Washington D.C. office is also accessible. 

Generally, small business owners can finance their endeavors in two ways: equity or debt financing. The SBA has recommendations for the type of financing business owners pursue based on their debt to equity ratio. Debt is considered funds borrowed and equity is dollars invested but not owed. 

Equity Financing

Small business owners can receive funds through equity financing without acquiring debt. In exchange for ownership share, another company raises funds for the recipient. The SBA recommends business owners take the equity financing route if their business has a high debt to equity ratio.

Debt Financing 

For the opposite case - a business owner has a high equity to debt ratio - debt financing is a safe option, and recommended by the SBA. Debt financing is the borrowing of money from a lending institution or private lender, to be repaid over time, and usually with interest. The allowable loan amount, length of repayment term, and interest rate will vary depending on the lender. 

Help Through SBA

Your local SBA office may be able to offer aid through the Financial Assistance Program. Eligibility depends on several factors, although special considerations may be made for franchises, farms, medical facilities and more. Here are the basic criteria for eligible companies:

• Must be for-profit.
• Must be operating within the United States and territories. 
• Must have a reasonable owner equity for investment.
• Must seek other funding sources including personal assets before seeking SBA's help. 

To see if you qualify for special considerations, contact your local Maryland SBA District Office.

About Maryland Business 

Maryland is one of the wealthiest states in the United States.  Statistically, the median household income rests around $65,000.  The state is a life sciences hub with over 350 biotechnology firms.  Johns Hopkins University, Human Genome Sciences, The Institute for Genomic Research, the Food and Drug Administration, the National Institute of Health, and the National Institute of Standards and Technology are all located within Maryland.

The capital of Maryland is Annapolis. I t is home to the United States Naval Academy.  The most populous city in the state is Baltimore. Baltimore offers its residents an array of activities, such as the National Aquarium, one of the largest in the world, and the Baltimore Symphony Orchestra.  Some major sports teams are located in Baltimore as well, including the Baltimore Ravens and the Baltimore Orioles.

Recently, Baltimore has grown to embrace the modern service economy.  It is home to six Fortune 1000 companies such as Constellation Energy, Black & Decker, Legg Mason, and T. Rowe Price.  Baltimore is widely regarded as one of the world's most important locations for medical knowledge.  Maryland is an excellent state in which to own commercial property.  Lender411 can help you find the best commercial mortgage rates.

Lenders in: Maryland.